Updated as of March 26, 2020
On April 1, 2020 The Family First Coronavirus Act (HR 6201) will go into effect (date change per DOL guidance). This Act guarantees free testing for COVID-19, establishes pay for emergency sick leave, expands medical and family leave, enhances unemployment insurance, increases Medicaid funding and expands food aid.
80 hours of paid emergency sick leave for workers to comply with COVID-19 restrictions, care for children due to closures of schools and daycares, unable to work to care for personal illness are included in the Act. It offers paid family and medical leave to care for family members (not personal illness) for up to 12 weeks. The first 10 days of emergency family and medical leave may be unpaid, unless employees opt to use paid time off during for these days.
Employers with fewer than 500 employees and government employers are mandated to comply, with exceptions for first responders and health care workers. Self-employed individuals are eligible for the new benefits under this act. It is unclear how independent contractors, and limited liability members will be eligible at this time, they are not specifically addressed in the Act. Employers with more than 500 employees are not subject to the mandates. Employers who are required to provide paid time off, need to initially bear those costs, but the federal government will provide payroll tax credits to help cover the costs.
Current FMLA Requirements
The Federal Medical Leave Act of 1993 (FMLA) provides 12 weeks of unpaid leave per year. Health benefits are required to be maintained by the employer during the employee’s leave. Employees are entitled to the same or equivalent position upon return, with a military personnel exception.
As stated in FMLA of 1993, to be eligible, employees must be employed for one year, have worked for 1,250 hours, and work in a location with 50 or more employees within a 75 mile radius. The employer is mandated if they had at least 50 employees for 20 workweeks in the current or preceding calendar year. This includes joint employers and successors of covered employers.
New Employer Mandates
Emergency Paid Sick Leave:
For government employers and employers fewer than 500 employees, all employees, excluding health care and first responders, must be provided with 80 hours of emergency sick leave (prorated for part-time employees) if they are unable to work or telecommute in these instances:
Is subject to a COVID-19 quarantine or isolation order
Must self-quarantine, advised by a health care provider because of COVID-19
Has symptoms of COVID-19 and is seeking a medical diagnosis
Must care for an individual subject to quarantine
Need to care for son or daughter because the child’s school or daycare is unavailable due to COVID-19
Experiences substantially similar conditions
If the leave is for self-care/quarantine, employers would pay the employee regular pay capped at $511 per day ($5,110 combined). When an employee must use the emergency sick leave to care for others, employers would pay the employee two thirds of wage capped at $200 per day ($2000 total).
Employers may not require employees to use other paid leave first and may not require the employee to find a replacement worker. The US Department of Labor is required to issue guidelines within 15 days of enactment on how to calculate the amount of emergency paid sick leave. They also have the authority to regulate and exempt small businesses (fewer than 50 employees) from having to provide emergency paid sick leave for employees who lose childcare due to COVID-19.
Employers face penalty for failure to comply and may not discriminate against employees who take emergency paid family medical leave. Employees may take emergency family medical leave before using new emergency pay created by the new FMLA.
Credits for this pay are taken on the employer’s Federal payroll tax quarterly filing. Employers receive a dollar for dollar tax credit and may reduce their payroll tax payments by the credits they will receive. Please see payroll tax credits below.
New provisions provide FMLA to employees employed at least 30 days for employers with fewer than 500 employees or government employees. This gives employees the right to take up to 12 weeks of protected leave through December 31, 2020 to care for a child under 18 without childcare. Employers may exclude health care workers and first responders from taking this emergency FMLA.
The first 10 days under this new FMLA may be unpaid. Employees may use any other paid time off available to them to cover that gap, but the employer cannot require PTO use before using the 12 weeks of extended FMLA leave. Employers pay employees two thirds of regular pay (capped at $200 per day, $10,000 per employee).
The US Department of Labor has the right to issue regulations to exclude health care workers and first responders from taking this leave. They also have the authority issue regulations to exempt businesses with fewer that 50 employees from FMLA requirements. The Act also exempts employers with fewer than 50 employees in a 75- mile radius from damages in an FMLA lawsuit.
Under this Act, employers are required to hold the employee’s job for them. Employers with less than 25 employees are exempt if the employee’s position no longer exists due to changes in operations because of the COVID-19 emergency.
This Act creates new, refundable payroll credits for employers to help cover the costs.
Payroll Tax Credits:
The Act provides refundable tax credits applied against the employer’s portion of Social Security or Railroad Retirement Tax Act (RRTA) amounts. The credit is dollar for dollar of the compensation paid (100%) in each calendar quarter to employees who are not working for the reasons above.
Employers shall retain the credit from federal payroll tax payments. If the credit exceeds the payroll tax, a refund will be calculated with the quarterly payroll tax return (941). Retention from payments for:
Employer portion of Social Security, Medicare and RRTA
Employee share of Federal withholding, Social Security and Medicare
The credit is capped at $511 of employee’s eligible wages per day for an employee who needs time off for isolation, Covid-19 illness, or compliance with a healthcare provider’s recommendation of the eligible wages. The credit is capped at $200 of employee’s eligible wages per day for an employee who needs time off to care for a child without childcare or a family member with COVID-19 illness. The credit for emergency paid sick leave wages is only available for 10 days maximum per employee. For FMLA, the credit is capped at $200 of eligible daily wages ($10,000 max for all quarters).
Both credits are increased by the costs incurred to maintain a group health plan to the extent that the expenses are excluded from the employee’s gross wages and properly allocable to either qualified sick or FMLA wages required to be paid under the Act. The exact allocation method will be provided later.
If the credits exceed the employer’s total liability for Social Security or RRTA, it is refundable. The employer cannot take a deduction for the amount of the credit. An employer may choose not to apply the credit. This credit is not allowed for family and medical paid leave eligible for a credit under Section 45S.
A self-employed individual may take a refundable tax credit against their self-employment tax. The lesser of the individual’s lost self-employment income or eligible wages per employee provide the cap for the credit.
Payments under FMLA and emergency paid sick leave will not be considered wages for the purposes of calculating the employer portion of Social Security, Medicare or RRTA tax.
The law does not exempt these payments from the definition of wages for other taxes: employee portion of Social Security, RRTA and Medicare tax.
No negative impact shall be caused to Social Security by the tax credit or exemption of sick pay and family leave pay. A transfer of funds from the General Fund to the Social Security and disability insurance trust funds will replace the lost employer contributions.
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