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Families First Coronavirus Response Act:  What Employers Need to Know

President Trump signed the Families First Coronavirus Response Act into law on March 18, 2020.  The new law, which will take effect on or before April 2, 2020, and will continue through December 31, 2020, contains provisions for both employee paid leave directly related to COVID-19 and employee paid leave to care for eligible family members.  The law applies to employers with fewer than 500 employees, although the Act offers exemptions for certain small businesses with fewer than 50 employees. The exact details surrounding the exemption for businesses with fewer than 50 employees have yet to be announced at this point.

There are two distinct but similar provisions that outline eligible paid leave granted by the Act. The two provisions may both be used by the employee, allowing for a potential total of 14 weeks of protected leave, 12 of which are required to be paid.

Emergency Paid Sick Leave

Employees, regardless of employment duration, are eligible for up to 80 hours of emergency paid sick leave under Division E of the Act. This leave is available to full-time employees as well as part-time employees, with the part-time employee leave being based on hours worked during an average two-week period. This leave is available to employees, whom can neither work or telework, and meet any of the conditions below:

  1. Employee is subject to a quarantine
  2. Employee received medical recommendation to be self-quarantined
  3. Employee is experiencing COVID-19 related symptoms and seeking diagnosis or testing
  4. Employee is caring for an individual mentioned in criteria numbers 1-3
  5. Employee is caring for a son or daughter whose school or childcare is closed due to COVID-19

Employees eligible for leave due to items #1, #2 and #3 must be compensated at their regular rate of pay up to $511 per day, for a maximum total of $5,110 during the 80 hours of emergency sick leave. Employees eligible due to items #4 and #5 must be compensated at two-thirds of their regular pay rate, up to $200 per day.

It is important to note that the employee shall not be required to utilize any paid time off prior to receiving the Emergency Paid Sick Leave, nor shall the employer require the employee to find a substitute employee during their leave.

Family and Medical Leave

Division E of the Act, relating to Family and Medical Leave, applies to employees who have completed at least 30 days of service with their employer. This leave is available to eligible employees who are unable to work or telework due to the need to care for a son or daughter under the age of 18 due to a school or daycare being closed. The employer may require the first 10 days of this leave be unpaid, after which the employee shall receive at least two-thirds of their regular pay up to $200 per day. The paid Family and Medical Leave is to last for a period of 10 weeks, with a leave pay up to $2,000 during the 10-week duration.

Employer Payroll Tax Credits:

A payroll tax credit has been implemented to reimburse employers required to comply with the Act. Under the credit provision, all eligible employee leave compensation, including related payroll taxes and health insurance costs, are eligible to be reimbursed up to the stated maximum compensation figures. The mechanism for receiving the reimbursement will most often be done via regularly scheduled payroll deposits by reducing the required deposit by the amount of expected tax credit.

For example, if an eligible employer pays $1,000 of Emergency Paid Sick Leave and $1,000 of Family and Medical Leave, they would be entitled to a $2,000 tax credit. When going to make their next required payroll tax deposit with the IRS, they would reduce the deposit by $2,000. Since this credit provision allows for a reimbursement of both gross wages and payroll taxes, there will be instances where the expected credit exceeds the required payroll tax deposit. In these cases, the employer would not make a payroll tax deposit for the respective period, and additionally would utilize the new streamlined credit system being introduced by the IRS this week to recoup the balance of tax credits owed to the employer.