March 19, 2020
By Taylor Porter Employment, Labor and Benefits Practice Group
On Wednesday, March 18, 2020, President Donald Trump signed into law the Families First Coronavirus Response Act, or H.R. 6201.
What does the bill cover?
The Families First Coronavirus Response Act (“FFCRA”) seeks to provide income to most American workers forced to be at home due to the coronavirus. Its provisions are two-fold.
It appears that both the Emergency Paid Sick Leave and the Public Health Emergency Leave apply to employers with fewer than 500 employees. Large companies with more than 500 employees are to rely upon their own leave policies.
Who Qualifies for the Emergency Paid Sick Leave?
The Emergency Paid Sick Leave Act covers all companies with up to 500 employees, unlike the Public Health Emergency Leave, which provides that small businesses with fewer than 50 employees can seek an exemption from the Department of Labor for qualifying business reasons. There is no such exemption for the Paid Sick Leave, thus ALL employers with less than 500 employees must pay their employees for 10 working days of sick leave if the employees meet the Act’s eligibility requirements (“Qualifying Circumstances”).
There are six qualifying reasons for coverage; the Bill directs that “an employer shall provide to each employee employed by the employer paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because”:
Unlike Public Health Emergency Leave, the paid sick time outlined above is available for immediate use by employees if they fall within the qualifying circumstances “regardless of how long the employee has been with the employer.” This means that even new hires who fall within the qualifications are entitled to up to ten (10) days of paid sick leave.
How much is an employer required to pay for Emergency Paid Sick Leave?
Full-time employees are entitled to two weeks (80 hours) of leave, and part-time employees are entitled to the typical number of hours that they work in a typical two-week period. An employer’s obligations are limited to paid leave of up to $511 per day ($5,110.00 in the aggregate for the 10 business days) where the leave is taken because an employee is quarantined (i.e., for qualifications (1), (2), and (3) above), and $200 per day ($2,000.00 in the aggregate) when leave is taken for reasons (4), (5), or (6) (i.e., to care for others or due to school or child care provider closures).
Who Qualifies for the Emergency Family and Medical Leave Expansion Act? [Public Health Emergency Leave]
The EFMLEA covers all companies with up to 500 employees. Unlike FMLA (Family Medical Leave Act), there is no 50 employee minimum; however, the bill does provide that small businesses with fewer than 50 employees may apply for an exemption with the Secretary of Labor “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”
Thus, the EFMLEA applies to all companies with less than 500 employees; however, if your company has less than 50 employees you may apply for an exemption to its provisions.
 The Secretary of the Department of Labor also has the authority to issue regulations to (a) exclude certain health care providers and emergency responders from the list of those employees eligible for leave; and (b) exempt small business with fewer than 50 employees where the imposition of these requirements would jeopardize the viability of the business as a going concern. However, how and when businesses with fewer than 50 employees would qualify for exemption is currently unclear. Additional regulations are anticipated, and we will update this information if/when they are issued.
To qualify for Public Health Emergency Leave, an employee must “have a qualifying need related to a public health emergency,” which according to the Act is defined as an employee who 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 care emergency.”
The employee must also have been employed for 30 days.
A “public health emergency” is defined to mean “an emergency with respect to COVID-19 declared by a Federal, State or local authority.”
Thus, it appears that an employee is only entitled to Public Health Emergency Leave under one condition: if an employee is unable to work (or telework) in order to care for the employee’s child if the child’s ordinary place of care (including a school) is unavailable. Employees are not entitled to the emergency FMLA leave if you are still sick after your two weeks of Emergency Paid Sick Leave, nor are employees entitled to Public Health Emergency Leave for caring for another person who has COVID-19, (i.e., a spouse, parent, etc.).
How much is an employer required to pay for Public Health Emergency Leave?
The first ten days of this leave may be in the form of Emergency Paid Sick Leave (described above – max of $511/day or $5,110.00 in the aggregate for quarantined individuals; and $200 a day or $2,000 in the aggregate if caring for someone else who is quarantined or their child’s school is closed) or an employee may choose to substitute accrued vacation leave, personal leave, or other medical leave during this period, but an employer may not require an employee to do so (an employee may want to do to this is if his or her regular accrued vacation leave, personal leave or medical leave entitles them to more than maximum daily rate under the Emergency Paid Sick Leave provisions (i.e., $511/day if quarantined and $200/day if caring for others/school closures).
While the bill suggests that the “first 10 days for which an employee takes leave” under this section may consist of unpaid leave, this appears to be meant to ensure an employee is not “double-dipping”. That is, the first 10 days of leave under the Public Health Emergency Leave are “unpaid,” because those days run contemporaneously with the Emergency Paid Sick Leave wherein employees will be paid at a rate of up to $511 a day if quarantined and $200 day if caring for a sick relative/school closures. Thus, the employee is getting “paid” for the first ten days, not through the Public Health Emergency Leave, but rather are being paid through the Emergency Paid Sick Leave Provisions.
After 10 days of sick leave, if applicable, qualifying employers must continue to pay Public Health Emergency Leave at a rate of no less than two-thirds of the employee’s usual rate of pay, with a maximum of $200 per day and $10,000.00 total.
Moreover, as with traditional FMLA coverage, this leave is job-protected, which means that an employer must return the employee to the same or equivalent job position upon his or her return to work. HOWEVER, there is an exception to the job protection provisions for employers with fewer than 25 employees if the employee’s position does not exist after leave due to an economic downtown or other operating conditions that effect employment caused by the COVID-19 pandemic.
What about part-time workers?
As the bill is currently written, part-time employees are not entitled to pay under the Emergency Family and Medical Leave Expansion Act; the bill does state that part-time employees may be entitled to the two-weeks of Emergency Paid Sick Leave equivalent to the number of hours they typically work during a two-week period. Therefore, if an employee usually works 20 hours a week, the employee is entitled to 40 hours of pay total. Again, this only applies to employers with less than 500 employees, so part-time employees for larger companies are likely not covered under the Act, in its present form.
What about Self-Employed individuals?
According to the bill, “gig” workers will be given similar benefits to Americans working at small and midsize companies. People who are self-employed, but work for another company, e.g. Lyft and Uber drivers, caterers or planners for major events (like South by Southwest) are eligible for a tax credit of up to two-weeks of Emergency Paid Sick Leave at their average pay (up to $511 per day) and 12 weeks of Public Health Emergency Leave at two-thirds their normal rate (up to $200 per day and $10,000 total). The tax credit will apparently be applied against a person’s income taxes and it is refundable, meaning taxpayers will get a government rebate if their sick or family leave pay was greater than their tax bill.
In order to qualify for the Emergency Paid Sick leave, these individuals must fall within the six qualification categories outlined above, and in order to qualify for the Public Health Emergency Leave, the individual must fall within the definition of a “qualifying need related to a public health emergency,” outlined above (i.e., caring for a son or daughter under 18 because school or day care is closed).
How long will these benefits last?
Currently, the bill specifies that it will cover Coronavirus-related sick leave that occurs from January 19, 2020 (the date of the first U.S. CoVID-19 diagnosis) through Dec. 31, 2020, at which point this Act will expire.
What is the effective date of the Act?
This Answer is not clear. The Act states that it will take effect no later than 15 days after signature (March 18, 2020); however, commentators believe the intent is for it to take effect immediately.
Tax provisions of the Bill
(Contributions from Taylor Porter Tax Practice Group)
The FFCRA also establishes certain tax credits to offer some financial relief to employers who are required to provide sick and family leave benefits and self-employed individuals that cannot work due to illness.
Employer Tax Credits
Employers will be entitled to claim refundable tax credits to offset a portion of payroll taxes arising from wages paid to employees who take time off under the bill’s sick leave and family leave programs. For the sick leave benefit, the tax credit is limited to $511 per day while an employee receives paid sick leave because they are quarantined or $200 per day if an employee is caring for another who is quarantined. This tax credit is limited based on the number of sick days paid, per worker. For the family leave benefit, the tax credit is limited to $200 per day, per employee, while the employee receives paid leave, and the credit cannot exceed $10,000 for any employee. Additionally, employers are entitled to tax credits for the 1.45% Medicare payroll tax and costs for group health care plans.
Self-Employed Tax Credits
The bill also provides similar refundable tax credits against the self-employment tax. For the sick leave benefit, the amount of the credit is equal to up to 10 days during the year that the person cannot work, multiplied by the lesser of (1) $511 per day or an individual’s average daily self-employment income if quarantining themselves, or $200 per day for people caring for another; or (2) 100% of a sick or quarantined person's average daily self-employment income for the year, or 67% of the average daily self-employment income for a person caring for another. For the family leave benefit, a self-employment tax credit is also available for an amount equal to up to 50 days during the year that a person cannot work, multiplied by the lesser of (1) $200 or (2) 67% of the person's average daily self-employment income for the year.
Please note: If you are an employer with fewer than 500 employees, you are likely going to be required to provide paid leave to employees who are unable to work because of certain circumstances relating to the Coronavirus pandemic. Employers should be prepared to implement these requirements in short order. Please note that this information is current as of the date of this Client Alert, based on the available information and guidance(s). However, this bill will probably be amended, or supplemented by subsequent legislation. Additionally, because COVID-19’s status and updates related to the same are ongoing, we recommend real-time review of guidance distributed by the CDC and local officials, before taking employment-related action.
If you have any further questions, please do not hesitate to contact any member of the Taylor Porter Employment, Labor & Benefits Practice Group, or our Tax Practice Group, with respect to tax credit and treatment related issues and questions.
Disclaimer: This article is for general information purposes only. Information posted is not intended to be legal advice. You should consult attorneys for any legal questions and/or advice.