BHBM Tax Law Alert | Families First Coronavirus Response Act
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FEDERAL TAX LAW UPDATE
President Trump Signs Families First Coronavirus Response Act
On March 18, 2020, the Senate passed the Families First Coronavirus Response Act (the “Act”). The Act is part of the government’s response to the economic impact of the COVID-19 virus. The bill was signed into law by President Trump shortly after being passed by the Senate. Now that the legislation has been signed, the provisions of the bill will become effective in fifteen (15) days.
Emergency Family and Medical Leave Expansion Act
- Expanded Coverage – The current employee threshold for Family Medical Leave Act (“FMLA”) coverage changes from covering employers with fifty (50) or more employees to covering those employers with fewer than five hundred (500) employees.
- Expanded Eligibility – Eligibility requirements are lowered so that any employee who has worked for their employer for at least thirty (30) days prior to the designated leave may be eligible to receive paid family and medical leave.
- Certain Employees Excluded – The Act includes language allowing the Secretary of Labor to exclude healthcare providers and emergency responders from the definition of employees who are allowed to take paid family and medical leave, and to exempt small businesses with fewer than fifty (50) employees if the required leave would threaten the viability of their business.
- Reason for Leave – Any individual employed by the employer for at least thirty (30) days (before the first day of leave) may take up to twelve (12) weeks of job-protected leave to allow an employee, who is unable to work or telework, to care for the employee’s child (under 18 years of age) if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency.
- Emergency FMLA Leave – The first ten (10) days of Emergency FMLA may be unpaid. During this 10-day period, an employee may elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the 10-day unpaid period. After the 10-day period, the employer generally must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled. This pay entitlement is limited to $200 per day per employee and $10,000 in the aggregate per employee.
- Payment Calculation for Certain Employees – Employees who work a part-time or irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six (6) months prior to taking Emergency FMLA. Employees who have worked for less than six (6) months prior to leave are entitled to the employee’s reasonable expectation at hiring of the average number of hours the employee would normally be scheduled to work.
- Equivalent Position – Employers with twenty five (25) or more employees will have the same obligation as under traditional FMLA to return any employee who has taken Emergency FMLA to the same or equivalent position upon the return to work. However, employers with fewer than twenty five (25) employees are generally excluded from this requirement if the employee’s position no longer exists following the Emergency FMLA leave due to an economic downtown or other circumstances caused by a public health emergency during the period of Emergency FMLA. This exclusion is subject to the employer making reasonable attempts to return the employee to an equivalent position and requires an employer to make efforts to return the employee to work for up to a year following the employee’s leave.
- Effective Date and Expiration – This program will become effective fifteen (15) days after its enactment and will remain in effect until December 31, 2020.
Emergency Paid Sick Leave Act
This portion of the Act allows an eligible employee to take paid sick leave because the employee is:
(1) Subject to a federal, state or local quarantine or isolation order related to COVID-19;
(2) Advised by a health care provider to self-quarantine due to COVID-19 concerns;
(3) Experiencing COVID-19 symptoms and seeking medical diagnosis;
(4) Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns;
(5) Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency; or
(6) 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.
Please note that caring for another who is subject to an isolation order or advised to self-quarantine as described above is no longer limited solely to family members.
- Eligibility – Employers with fewer than five hundred (500) employees are required to provide full-time employees (regardless of the employee’s duration of employment prior to leave) with eighty (80) hours of paid sick leave at the employee’s regular rate (or two-thirds the employee’s regular rate to care for qualifying reasons 4, 5, or 6 listed above).
- Limit on Paid Sick Leave Wages – Paid sick leave wages are limited to $511 per day up to $5,110 total per employee for their own use and to $200 per day up to $2,000 total to care for others and any other substantially similar condition.
- Carryover – This paid sick leave will not carry over to the following year and may be in addition to any paid sick leave currently provided by employers.
- Payment Calculation for Certain Employees – Employees who work a part-time or irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six (6) months prior to taking paid sick leave. Employees who have worked for less than six (6) months prior to leave are entitled to the average number of hours the employee would normally be scheduled to work over a two-week period. A business employing fewer than five hundred (500) employees is required, at the request of the employee, to pay a full-time employee for eighty (80) hours of mandated emergency paid sick leave instead of the initial ten (10) days of unpaid leave permitted by the Emergency Family and Medical Leave Expansion Act.
- Effective Date and Expiration – This program will become effective fifteen (15) days after it is enacted and will remain in effect until December 31, 2020.
Tax Credits for Paid Sick and Paid Family and Medical Leave
- Employers who are required to provide the Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave are provided series of refundable tax credits. These tax credits are allowed against the employer portion of Social Security taxes. While this limits application of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes owed.
- Specifically, employers are entitled to a refundable tax credit equal to one hundred percent (100%) of the qualified sick leave wages paid by employers for each calendar quarter in adherence with the Emergency Paid Sick Leave Act. The qualified sick leave wages are capped at $511 per day ($200 per day if the leave is for caring for a family member or child) for up to ten (10) days per employee in each calendar quarter.
Moreover, employers are entitled to a refundable tax credit equal to one hundred percent (100%) of the qualified family leave wages paid by employers for each calendar quarter in accordance with the Emergency Family and Medical Leave Expansion Act. The qualified family leave wages are capped at $200 per day for each individual up to $10,000 total per calendar quarter. Only those employers who are required to offer Emergency FMLA and Emergency Paid Sick Leave may receive these credits.
DOL guidance on the issue can be found here: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
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The information contained within this newsletter does not constitute legal advice and is not intended to create an attorney-client relationship. You should consult an attorney for individual advice regarding your own particular situation.