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Employer COVID-19 Update – Summary of New Paid Sick Leave and FMLA Obligations Effective April 2nd

by | Mar 20, 2020 | Business And Corporate Law

The “Families First Coronavirus Response Act” (H.R. 6201) (the “Act) was signed into law by President Trump on Wednesday, March 18, 2020.  The Act was revised slightly from the bill originally passed by the House of Representatives on March 14.

This summary of the Act’s impact is limited to its provisions on paid and unpaid leave, it does not address other provisions of the Act, such as emergency grants for unemployment insurance, insurance coverage for COVID-19 testing, and more.

Big Picture – 12 additional weeks of paid leave

This Act is in effect for the remainder of 2020 (from Apr. 2nd – Dec. 31st). During that time, it establishes the following temporary benefits:

Paid Sick Leave: The Act obligates employers with fewer than 500 employees to provide 2 weeks of additional paid sick leave to employees absent because of a specific reason associated with COVID-19.

Emergency FMLA Expansion: The Act obligates employers with fewer than 500 employees to provide 12 weeks (10 days unpaid, remainder subject to partial pay) of FMLA leave to employees that need to care for a child due to a school or daycare closure.

Who is Excluded?

This law excludes the following employers (these employers do not have to provide their employees these new benefits):

  • Employers with more than 500 employees;
  • Employers with less than 50 employees if these benefits would jeopardize the viability of the business as a going concern. This exclusion will be subject to forthcoming regulations issued by the U.S. Dept. of Labor; and
  • Employers who employ health care providers or emergency responders, if the employer elects to exclude such employees from these benefits.

New Federal Paid Sick Leave

Employers with fewer than 500 employees must immediately make available 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) for the following reasons:

  1. The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  4. The employee is caring for an individual (not limited to a family member) who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
  5. The employee is caring for their son or daughter if the school or place of care of the son or daughter has been closed, or the childcare provider of the son or daughter is unavailable, due to COVID-19 precautions.
  6. 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.

This new sick leave benefit is in addition to what employers currently provide their employees. In other words, Washington employers must continue to provide state sick leave, in addition to this new federal sick leave.

Part-time employees are entitled to an amount of paid sick time equal to the number of hours that such employee works, on average, over a 2-week period.

Amount of Pay

Leave as a result of paragraphs (1), (2), and (3) (employee’s own use) is paid as follows:

  • Sick leave is paid at the employee’s regular rate of pay.
  • The amount of pay is capped at $511/day and $5,110 in the aggregate

Leave as a result of paragraphs (4), (5), and (6) (care for others) is paid as follows:

  • Sick leave is paid at 2/3rd the employee’s regular rate of pay
  • The amount of sick leave pay is capped at $200/day and $2,000 in the aggregate

Part-time employees, or those that work an irregular schedule, are entitled to be paid based on the average number of hours they worked for the prior 6 months. Employees who have worked for less than 6 months are entitled to the average number of hours the employee would have normally be scheduled to work over a 2-week period.

Availability / Carryover / Cash out

This sick leave benefit is immediately available to all employees, there is no accrual rate or period. This sick leave benefit does not carryover from one year to the next. The employer is not required to pay out unused paid sick leave if the employee separates from employment.

An employer may not require an employee to use other paid leave provided by the employer before the employee uses this paid sick leave.

New Emergency FMLA Expansion

Under the “Emergency Family and Medical Leave Expansion Act,” private employers with fewer than 500 employees must provide 12 additional weeks of paid and unpaid, job protected leave for employees that experience a “qualifying need” related to a public health emergency.

Qualifying Need

A qualifying need means the employee is unable to work (or telework) due to a need for leave to care for a 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 is unavailable, due to a public health emergency. This benefit applies to all employees who have been employed for at least 30 calendar days. The usual FMLA prerequisite—that an employee must have worked for the employer for 12 months and for 1,250 hours—does not apply to these Emergency FMLA entitlements.

Amount of Pay

The first 10 days of Emergency FMLA leave are unpaid, but an employee may elect to substitute any accrued vacation or paid sick leave during this time.

For full time employees, this Emergency FMLA leave must be paid at 2/3 of the employee’s regular rate of pay, with a cap of $200/day and $10,000 in the aggregate.

For non-full time employees, this Emergency FMLA leave shall be paid based on the average number of hours worked in the prior 6 months. If the employee has worked for less than 6 months, s/he is entitled to the employee’s reasonable expectation at hiring of the average number of hours s/he would normally be scheduled to work.

Job Restoration

Employers with 25 or more employees must provide job restoration upon an employee’s return from Emergency FMLA leave (same or equivalent position).

Employers with less than 25 employees are not required to provide job restoration if the employee’s position no longer exists due to an economic downturn or other circumstance caused by a public health emergency. This exclusion is subject to the employer making reasonable efforts to return the employee to an equivalent position for up to one-year after the employee’s leave.

Tax Credits

These emergency leave benefits may be offset by the following tax exclusions and credits:

Social Security

Employers are exempted from paying their portion of Social Security tax on the sick leave and Emergency FMLA wages/benefits required to be paid under the Act.

Payroll Tax Credits

The Act provides a refundable tax credit worth 100% of the sick leave and Emergency FMLA wages/benefits paid by an employer (pursuant to the Act) for each calendar quarter through the end of 2020. The tax credit is allowed against the tax imposed under the employer portion of Social Security payroll taxes.

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. If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is refundable to the employer.

Tax Credits for Self-Employed Individuals

Self-employed workers can also claim a credit against their regular income taxes. The credit covers 100% of the self-employed individuals’ daily self-employment income or 67% if an individual is taking care of a child whose school is closed. The per-day amount is limited to the lesser of an individual’s average daily self-employment income, or $511 per day if caring for themselves or $200 if caring for a minor child. The number of eligible days is limited to 10 if related to sick leave and 50 if related to family leave. The Act directs the Treasury to provide guidance on what documentation self-employed individuals must submit to claim the credit.

This is an informational resource for employers responding to the recent COVID-19 pandemic. Please be aware, the information provided is not legal advice and the issues and legal concerns mentioned will likely change as the spread of this virus and its impact continues to grow and evolve.