Last evening, the federal government approved the Families First Coronavirus Response Act. The new law takes effect "no later than" 15 days from the date of its enactment which is April 1 and ends on December 31, 2020.
This new law will provide significant new benefits to employees in terms of Paid Sick Leave and Paid Emergency Family Medical Leave Act (FMLA) leave. The law provides some tax credits for employers. Below we will discuss some important highlights of this new law.
CEA understands that things are rapidly changing for employers. We will continue to update you as more information becomes available. Please check out our free Coronavirus FAQ for California Employers for additional information.
Tax Credits for Employers Providing Paid Sick Leave and Paid Emergency FMLA
The new Act provides a series of quarterly refundable tax credits for employers who are required to provide the emergency paid sick leave and emergency paid FMLA leave. These tax credits are allowed against the employer portion of Social Security taxes. While this limits the application of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages to exceed the taxes they would owe.
Specifically, employers are entitled to a payroll tax credit for each calendar quarter in an amount equal to 100% of the qualified paid sick leave wages paid by the employer in the quarter not to exceed a set aggregate per day and per employee. More information will be provided as the IRS issues guidance.
Emergency Paid Sick Leave
Employers with fewer than 500 employees must provide employees with up to 80 hours of emergency paid sick leave benefits to be used for Coronavirus-related absences, pro-rated for part-time employees. This is a lump sum of hours to be given to employees that would be available to use right away. This leave is in addition to any other leave. California employers with existing paid sick leave policies do not appear to be exempt. The law is in place until December 31, 2020.
An employee may use paid sick leave if the employee is unable to work for any of the following reasons:
Employees using paid sick leave for (1)–(3) above must be paid their "regular rate of pay." Employees using leave for reasons (4)–(6) must be paid 2/3 of these amounts.
Note, however, that the amount paid is capped:
The Secretary of Labor can issue regulations within the next two weeks to exempt health care providers, emergency responders, and employers with fewer than 50 employees from this paid sick leave law if compliance would jeopardize business viability. There is no built-in exemption, however — so we will have to wait and see.
You may be asking, "What about employers with 500 or more employees?" According to legislative authors, the sponsors did not want to give the tax credits to larger businesses who can fund these leaves. Treasury Secretary Steven Mnuchin said that "big companies can afford these things." Speaker Pelosi said on Twitter "I don't support U.S. taxpayer money subsidizing corporations to provide benefits to workers that they should already be providing."
Emergency Family and Medical Leave Act
The new law also includes a significant amendment and expansion of the Family and Medical Leave Act (“FMLA”) through December 31, 2020. The current employee threshold for FMLA coverage would change from only covering employers with 50 or more employees to instead covering those employers with fewer than 500 employees. The Secretary of Labor has the authority to issue regulations to exempt small businesses with less than 50 employees, healthcare providers, and emergency responders, but they are not yet exempt.
Unlike current FMLA requirements, employees are eligible for the leave if they have worked for the employer for at least 30 calendar days. The leave can be used for a "qualifying need" related to a public health emergency concerning Coronavirus, as declared by federal, state, or local authorities.
While the current FMLA is unpaid, FMLA under this new Act provides for paid leave during this emergency.
Looking for more information on the Emergency Paid Sick Leave and Paid FMLA? Register for our free webinar on Thursday, March 26 from 12 p.m. – 1 p.m.