The COVID-19 Coronavirus Response Act was signed by the President on March 18, 2020. We’ve had lots of questions, so are doing our best to summarize below. The provisions of the Act are effective April 2, 2020 and will remain effective until December 31, 2020. There are really three components to the Act that specifically apply to employers:
- Expansion of Family & Medical Leave Regulations
- Emergency Sick Leave
- Tax Credits for Pay Under these Programs
It’s all a little challenging to navigate since several components feel like they overlap. If you’re a company of under 50 employees, we should help familiarize you with the provisions of the Family & Medical Leave Act. Towards the end we’ve provided an example of how pay under each of these provisions works and summarize the way in which employers may recoup these funds by offset from the employer portion of social security payroll taxes.
It’s important to note in all of this that the provisions only apply as follows:
Extended FMLA: Only payable for those employees who must care for children when school is closed.
Paid Sick Leave: Only payable to those directly affected by illness, quarantine, or awaiting a medical diagnosis as a result of COVID-19, caring for someone with the virus or caring for children because school is closed.
Those of you who have provided employees with the ability to telework and have employees working from home, these provisions do not apply unless those employees become too sick to work or are unable to telework because of the need to care for someone who is sick. You should familiarize yourself with the provisions however, since once someone becomes sick, these new Act provisions apply.
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Expansion of Family & Medical Leave Act Provisions
The current employee threshold for FMLA coverage is currently 50 employees. Under the Act, it would cover all employers with fewer than 500 employees. It also lowers the eligibility requirement for employees to be covered under FMLA from 12 months to covering any employee who has worked for the you for at least 30 days prior to the beginning of the leave. As a result, many of you that were not previously subject to the FMLA regulations may be required to provide job-protected leave to employees for a COVID-19 coronavirus-designated reason.
For those unfamiliar with FMLA, it provides employees a period of 12 weeks of job-protected leave – meaning that you are expected to hold an employee’s position open, or, return them to a comparable position if they return to work prior to the expiration of 12 weeks. There is also the misconception that FMLA has been considered paid leave historically, which it isn’t. However, under this portion of the Act, a limited amount of compensation that employers are expected to pay has been added and is more fully described below.
There is also a provision that the Secretary of Labor could exclude healthcare providers and emergency responders from the definition of employees who are allowed to take leave under this part of the Act, and to exempt small businesses with fewer than 50 employees if the required leave would jeopardize the viability of those businesses. It will be interesting to see how the latter plays out.
Eligibility and Reasons for Emergency Leave Under this Part of the Act
Any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 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. This is the only qualifying need for Emergency FMLA and was a significant change from the prior version of the bill passed by the House over the weekend, which allowed several other COVID-19-related reasons to provide Emergency FMLA.
Paid Leave Under this Part of the Act
The first 10 days of Emergency FMLA that employees take may be unpaid, though employees can elect to use paid leave (like PTO, vacation or sick leave) to cover some or all of the 10-day unpaid period. However, you can’t force them to take their accrued paid leave balances. This also works concurrently with the Emergency Paid Sick Leave provision outlined later in this summary, which requires employers to pay for the first 10 days of leave subject to certain eligibility provisions – so we want to keep you alert to that fact, and have illustrated in the pay examples later in this document.
After the 10-day period, employers 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 for the duration of time the employee is out on leave. The Act limits this pay entitlement to $200 per day and $10,000 in the aggregate per employee.
Employees who work a part-time or irregular schedule are entitled to be paid based on the average number of hours they worked for the six months prior to taking Emergency FMLA. Employees who have worked for less than six months prior to leave are entitled to the employee’s reasonable expectation at hiring of the average number of hours per week the employee would normally be scheduled to work.
Job Restoration & Return to Work at End of Leave
Employers with 25 or more employees will have the same responsibilities that are called for under the traditional FMLA provisions to return any employee who has taken Emergency FMLA to the same or equivalent position when they come back to work. However, employers with fewer than 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 downturn 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.
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Emergency Paid Sick Leave Under the Act
The Act allows an eligible employee to receive paid sick leave in the following circumstances:
- Because the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19;
- Because the employee is advised by a health care provider to self-quarantine due to COVID-19 concerns;
- Because the employee is experiencing COVID-19 symptoms and seeking medical diagnosis;
- Because the employee is 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;
- Because the employee is 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
- 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.
Caring for another who is subject to an isolation order or advised to self-quarantine as described above is no longer limited to just family members.
Eligibility for Paid Sick Leave
The Act requires employers with fewer than 500 employees to provide full-time employees, regardless of how long they have worked for you, with 80 hours of paid sick leave at 100% employee’s regular rate of pay in the case of their own illness, official quarantine, or if they are awaiting diagnosis, or 66.67% of the employee’s regular rate of pay if their absence is to care for others, or have children home from school because they have closed and cannot telework.
There are caps and limits on paid sick leave under this provision. 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 as defined above, or if school or daycare is closed and employees cannot work or telework. This paid sick leave will not carry over to 2021 and may be in addition to any paid sick leave currently provided by you.
Calculating the rate of pay for full time-employees is fairly easy – it’s 80 hours of pay, which doesn’t appear to differentiate if you have a shorter full-time work week than 40 hours. Part-time employees’ rates should be calculated in the same way as we outlined above under the FMLA provision. A business employing fewer than 500 employees is required, at the request of the employee, to provide pay under this emergency paid sick leave to cover the initial 10 days of unpaid leave permitted by the Emergency Family and Medical Leave Expansion Act.
Pay Examples Under these Programs
How Both FMLA Paid Leave and Sick Leave Work – Example for Illness of Employee, Required Quarantine or Awaiting Diagnosis:
Amanda Smith is a full time, hourly employee who works a 40-hour work week. She is paid at the rate of $20 per hour, or $41,600 per year. Amanda contracts the virus and is too sick to work. She is out for 4 weeks as a result.
Weeks 1 & 2 Paid for full 40-hour work weeks by employer if requested by employee, not required to use existing accrued but unused paid leave to cover. At $1,600 for 2 weeks, this is under the cap of $511 per day, or total of $5,110 for duration of 2 weeks
Weeks 3 to 4 Can use accrued paid off time or time without pay.
Overall Paid Leave Under Act Variable but below the thresholds under either provision.
How Both FMLA Paid Leave and Sick Leave Work – Example for School Closings:
Amanda Smith is a full time, hourly employee who works a 40-hour work week. She is paid at the rate of $20 per hour, or $41,600 per year. Amanda has two school age children and the school has closed for the duration of the school year. Amanda cannot work remotely via telework due to the nature of her position and is therefore eligible for paid leave under this provision of the act. She is out for 9 weeks as a result.
Weeks 1 & 2
Paid for full 40-hour work weeks by employer if requested by employee, not required to use existing accrued but unused paid leave to cover. At $1,600 for 2 weeks, this is under the cap of $511 per day, or total of $5,110 for duration of 2 weeks
Weeks 3 to 9
Payment at the rate of 66.67% of pay for a regular work week – or $533.60 per week. This amount is less than $200 per day.
Overall Paid Leave Under Act
$3,735.20 which is below the thresholds under either provision.
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Tax Credits for Paid Extended Family and Medical Leave And Emergency Paid Sick Leave
This section of the Act provides a series of refundable tax credits for employers who are required to provide the Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave described above. 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 they would owe.
Specifically, employers are entitled to a refundable tax credit equal to 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 10 days per employee in each calendar quarter.
Similarly, employers are entitled to a refundable tax credit equal to 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.
Bottom line, if you find yourself providing benefits under either of these programs, you should be tracking them. We would recommend that you utilize a new pay code in your payroll system. Through our research, we have not determined how these amounts will be reported, so all we do to ensure we are tracking appropriately will be helpful as opposed to trying to recreate at a later date.
Disclaimer
Of course, the People People team aren’t lawyers or accountants – we’re just HR folks trying to provide you with as much information as we can, as quickly as we can. Nothing in this communication should be considered legal or tax advice.
If you have any questions at all don’t hesitate to call or email us and we’ll do our best to help you.