Overview of the Families First Coronavirus Response Act
By Dave Reyes, Shareholder
On March 18, 2020, the Families First Coronavirus Response Act was signed into law, marking the second major legislative initiative to address COVID-19 (the first was signed on March 6 and provided emergency funding relief for domestic and global efforts).
The purpose of the Families First Coronavirus Response Act is to provide employees with family and medical leave, employee sick leave, and to provide employers and self-employed individuals tax credits to offset employers’ increased costs related to providing this leave. This Act will also help employers deal with the economic issues related to the COVID-19 pandemic. Here is a brief summary of the three provisions primarily affecting employers.
Emergency paid sick leave
- Applies to private employers with less than 500 employees
- An employee eligible for leave does not need to be employed for any specific period of time to qualify for this benefit
- The employer must provide 80 hours of paid sick leave to full-time employees who are unable to work or work from home for 6 specified COVID-19 related reasons. Part-time employees are entitled to paid sick leave based on the average number of hours worked over a two-week period
- Amounts payable to an employee depend on the reason for their absence. An Employee can qualify for paid sick leave for the following three reasons:
- Employees who are under a COVID -19 quarantine or an isolation order
- Advised by a health care provider to self-quarantine
- Are experiencing COVID-19 symptoms and are seeking diagnosis
These individuals who are caring for themselves must be paid their regular rate, up to a maximum of $511/day ($5,110 total) per employee.
- The remaining three reasons are for employees who are caring for another person impacted by COVID-19:
- Caring for an individual subject to a quarantine or isolation order
- Caring for a son or daughter whose school or place of care has been closed, or whose childcare provider is unavailable, or
- Is experiencing substantially similar conditions specified by the U.S. Secretary of Health and Human Services Alex Azar
Employees who are unable to work, because they are caring for another person, must be paid at least two-thirds of their regular compensation up to a maximum of $200/day ($2,000 total) per employee.
- Note that certain exemptions and special rules may apply regarding paid sick leave
Expanded family and medical leave
- The Families First Coronavirus Response Act requires employers with less than 500 employees to provide both paid and unpaid public health emergency leave to certain employees through December 31, 2020. To qualify for this leave, which is separate from the sick leave rule, an employee must have been employed at least 30 days and is unable to work or work from home because they need to care for a child under the age of 18 because their school or day care center has been closed. Employees must be provided up to 12 weeks of job-protected leave, though only part of it is paid leave. The first 10 days of leave may be unpaid, however after that, paid leave is required and must be at least two-thirds of an employee’s regular pay. The pay requirement is capped, however, to $200/day and $10,000 total per employee.
- Keep in mind that certain exemptions and special rules may apply regarding expanded family and medical leave.
Employer tax credits
- To help employers cover the cost of payments made for any paid time off, there are new tax credits available to employers.
Sick Leave Credit – The credit available for each employee who is paid sick leave is the lesser of their sick leave pay or depending on the reason for their leave (1) $511/day for employees using leave caring for themselves or (2) $200/day for employees on leave to care for another person or family member.
Expanded Family and Medical Leave Credit – The credit available for each employee is limited to $200/day up to a maximum of $10,000.
An employer will claim these tax credits through the payroll tax filing process on Form 941. The IRS has stated more specific guidance for claiming these credits is expected to be issued next week.
The new Families First Coronavirus Response Act law provides these paid leave provisions must take effect no later than 15 days after enacted which is April 1, 2020. They will expire on December 31, 2020. Labor law is complicated and may require consulting with your legal counsel. More relief affecting employees and businesses is sure to follow this legislation. We will continue to monitor the latest tax and business developments on the COVID-19 pandemic. Stay safe, and as always, contact your Maloney + Novotny advisor for any questions or advice, or use this online contact form and we will get back to you as soon as possible.
For more information on paid leave and related tax credits, here are links to the Department of Labor and IRS websites which provide more information, including frequently asked questions.