Devine Millimet | NH Law Firm

FFCRA Establishes New Paid Sick Leave & Family Leave Rights + Employer’s Right to Receive Tax Credit

Families First Coronavirus Response Act Establishes New Paid Sick Leave And Family Leave Rights, Along with an Employer’s Right to Receive Tax Credits

Authors:
Margaret "Peg" O'Brien, Esq.
Donald (“Lee”) Smith, Esq.
Jon B. Sparkman, Esq.
Seamus S. Ovitt, Esq.

*UPDATE TO ARTICLE:  On March 24, 2020, after the below article was published, the US Department of Labor issued guidance stating that the effective date of the new law, FFCRA, will be APRIL 1, 2020 and not APRIL 2, 2020 as stated below.  The US Department of Labor provided additional clarification regarding the leave laws, which we will discuss in a separate article.  Please click here for the guidance.

March 18, 2020

On March 18, 2020, President Trump signed the “Families First Coronavirus Response Act” (“FFCRA”) into law.  FFCRA is significantly different than an earlier version passed by the U.S. House of Representatives, which was referenced in earlier client e-alerts.  In summary, FFCRA establishes two new leave rights for employees: (1) an Emergency Paid Sick Leave that provides employees with up to 80 hours of leave time for certain COVID-19 related reasons; and (2) a limited expansion of the Family and Medical Leave Act (“FMLA”) for absences due to an employee’s need to care for a child under the age of 18 who is home due to school or day care closures or because their caregiver is unavailable as a result of COVID-19.  FFCRA also establishes a right for employers to receive tax credits for 100% of the payments made to employees pursuant to these two leave provisions (plus the cost of the employer’s health insurance premiums during the leave).  Both of these leaves of absence apply to private employers with fewer than 500 employees, and both laws are effective April 2, 2020 and are currently scheduled to expire December 31, 2020.

This e-alert provides answers, guidance and resources on the requirements of this new law, and in particular FFCRA’s two leave of absence and tax credit sections, and provides details on the recent guidance issued by the US Department of Labor on FFCRA’s obligations for employers and the joint guidance issued by the Treasury, IRS and US Department of Labor.  We anticipate additional guidance and interpretation for employers will be issued by the federal government and will provide additional updates as they are published.  

EMERGENCY PAID SICK LEAVE

When is the Emergency Paid Sick Leave (“EPSL”) effective?
An employer’s obligations to provide EPSL will become effective 15 days after it is enacted by President Trump (or April 2, 2020) and will remain in effect until December 31, 2020. 

Who is a covered employer?
Any employer with fewer than 500 employees*
*There may be future exemptions for businesses with less than 50 employees when the fulfillment of the paid leave obligations would jeopardize the viability of the business as a going concern.  The US Department of Labor has been tasked with establishing these exemptions.  We anticipate the US Department of Labor will provide additional guidance on some aspects of the FFCRA this week.

Who is a covered employee?
All employees are eligible.

What are the reasons for paid sick leave?
FFCRA 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.
How much leave are they entitled to?
80 hours of paid sick leave for full-time employees (or the equivalent of the average number of hours over two weeks for part time employees)

How much pay are they entitled to?
Paid sick leave is paid at the employee’s regular rate for a use described in paragraph (1), (2), or (3) or the applicable minimum wage whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period).  For absences due to paragraph (4), (5), or (6) above, employers are entitled to pay at 2/3rds of their regular rate or 2/3rds of the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period). 

How does an employee request leave, and are there any poster requirements?
Employers can require employees to follow reasonable notice procedures to receive paid sick leave under the FFCRA.  All employers must post a notice regarding the requirements of EPSL throughout the workplace, and should distribute to remote-based employees in an electronic format.  The US Department of Labor has advised in its recent guidance that it will provide a model notice by March 25, 2020 for employers to use. 

EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT

When is the Emergency Family and Medical Leave Expansive (“EFML”) effective?
An employer’s obligation to provide EFML will become effective 15 days after it is enacted by President Trump (or April 2, 2020) and remain in effect until December 31, 2020. 

Who is a covered employer?
Any employer with fewer than 500 employees*
*There may be future exemptions for businesses with less than 50 employees when the fulfillment of the paid leave obligations would jeopardize the viability of the business as a going concern.  The US Department of Labor has been tasked with establishing these exemptions.  We anticipate that the US Department of Labor will provide additional guidance on some aspects of the FFCRA this week.  However, as presently drafted, FFCRA’s EFML amendment applies to employers with less than 50 employees, even though they are not otherwise required to comply with the leave requirements of the FMLA (e.g., for birth or adoption of a child; an employee’s serious health condition, etc.). 

Who is a covered employee?
Employees who have been employed for at least 30 days.

What relief does this section provide?
Employers must provide covered employees with up to 12 weeks of job-protected leave if the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.  Pursuant to the US DOL guidance, the first 2 weeks of the EFML expansion will be pursuant to the Paid Sick Leave provision, followed by up to 10 weeks of paid expanded family and medical leave.

What is a public health emergency?
An emergency with respect to COVID-19 declared by a Federal, State or local authority.

Is EFML paid?
Yes.  The employee may take two weeks of paid leave pursuant to the emergency Paid Sick Leave, and as set forth in the FFCRA and further clarified by the US Department of Labor’s guidance, additional leave must be paid by the employer pursuant to the FMLA expansion.  The employer is required to pay the employee for EFML an amount not less than 2/3rds of the employee’s regular rate of pay based on the number of hours the employee would otherwise be normally scheduled to work.

Is there a cap on expanded FMLA leave pay?
Yes.  The pay shall not exceed $200 per day or $10,000 in the aggregate (which, when combined with EPSL, would be an aggregate of $12,000).

Is the employee required to provide advance notice of the need for expanded FMLA leave?
Yes.  When the need for leave is foreseeable, the employee must provide the employer with such notice of leave as is practicable. 

What does job-protected leave mean?
At the conclusion of the EFML leave of absence, the employee must be returned to the same or a substantially equivalent position (with some specific exceptions).

How does an employee request leave, and are there any poster requirements?
Employers can require employees to follow reasonable notice procedures to receive EFML under the FFCRA.  All employers must post a notice regarding the requirements of EFML throughout the workplace, and should distribute to remote-based employees in an electronic format.  The US Department of Labor has advised in its recent guidance that it will provide a model notice by March 25, 2020 for employers to use. 

TAX CREDITS

Does the FFCRA provide tax credits to employers?
Yes. FFCRA provides tax credits to employers with fewer than 500 employees. These credits are designed to offset the costs associated with paying employees for the two (2) leaves described above for EPSL and EFML.

Does FFCRA apply to non-profit organizations?
Yes.  FFCRA applies to all employers with fewer than 500 employees, and does not differentiate between for-profit and non-profit business entities. However, tax credits shall not apply to the Government of the United States, any State, or any governmental agency or subdivision.

What kind of tax credits does FFCRA provide for? For how long?
FFCRA provides a refundable tax credit worth 100 percent of qualified EPSL and EFML wages paid by an employer for each calendar quarter through December 31, 2020. The tax credit is allowed to be used against the tax imposed by the employer portion of Social Security and Railroad Retirement payroll taxes.

How much? How are the tax credits calculated?
FFCRA allows employers to take tax credits for 100% of the amount of sick leave (EPSL) wages employers pay pursuant to the FFCRA, up to the maximum amounts of $200 or $511 per employee (as applicable, depending on the type of leave taken as noted above) for each employee paid sick leave wages up to ten (10) days. 

FFCRA allows employers to take tax credits for 100% of the amount of emergency family and medical leave (EFML) wages employers pay pursuant to the FFCRA, up to the maximum amounts of $200 per employee for each day for which the employee is paid leave wages under the emergency family and medical leave (and, in the aggregate, $10,000 per employee).

Can employers get credit for increased health plan expenses?
Yes.  Per FFCRA, the EFML and EPSL leave credits would be increased to include additional amounts that employers pay for an employee’s health plan coverage while they are on leave (see US DOL guidance at Footnote 1). 

The Act allows for the credit amount(s) to be increased by the amount of the employer’s group health plan expenses that are “properly allocated” to qualified emergency leave and sick leave wages. Health plan expenses are “properly allocated” if made on a pro rata basis – among covered employees and periods of coverage. 

Are excess credits refundable?
The amount of the paid sick leave credit that is allowed for any calendar quarter cannot exceed the total employer payroll tax obligations on all wages for all employees. The credit is refundable if it exceeds the amount the employer owes in payroll tax.

Are there any limitations with regards to tax credits provided for by the Act?
Yes, employers may not receive a tax credit pursuant to the FFCRA if they are also receiving a credit for paid family and medical leave under the 2017 Tax Cuts and Jobs Act. Employers would instead have to include the credit in their gross income.

Are additional calculation guidelines coming?
Yes.  The FFCRA requires the Secretary of Labor to issue additional guidelines to further assist employers in calculating paid sick time, within 15 days of the Act’s enactment.

EMPLOYER ACTION ITEMS

Employers subject to the requirements of the FFCRA, that is, those with fewer than 500 employees, must act quickly to prepare the workplace for employee requests for EPSL and EFML and make sure to post the required US Department of Labor model notice once it is released on Wednesday, March 25, 2020.  Employers should consult with counsel regarding the interplay between the leave benefits under the FFCRA and existing policies, and the application of the FFCRA to a potential “shelter in place” or workplace decision to impose furloughs (temporary layoffs or unpaid leaves).

With any leave policy, employers should also consider adopting policies consistent with the requirements of the two leave laws in effect pursuant to the FFCRA.  These laws are effective April 2, 2020.  Per current FFCRA terms, paid leave provided to employees for COVID-19 related reasons in advance of April 2, 2020 will not be eligible for the tax credits described above.

Employees are nervous.  Employers should take care to advise employees on any and all efforts to keep the workplace safe and the company’s daily review of the CDC website and all other applicable state and federal guidance on COVID-19.  Preparedness is key to successful leadership.  Consider developing an outline of issues in the event of a government closure of all or part of your workplace, or in the event a reduction is required due to economic factors.
 

Email Updates:

To sign-up to receive E-Alerts on COVID-19, CLICK HERE, or email us at newsletters@devinemillimet.com.