Posts Tagged 'Tax Credits for Paid Family Leave'

The new Families First Coronavirus Response Act (FFCRA) became effective April 1, 2020, as the first substantial U.S. labor law response to the extensive disruption of employment resulting from COVID-19. Employers with fewer than 500 employees are affected, and need to understand its implications to be able to respond legally and appropriately. The most important parts of FFCRA are divided into three sections:

• Emergency Paid Sick Leave Act (EPSLA)
• Emergency Family and Medical Leave Expansion Act (EFMLA)
• Tax Credits for Paid Sick and Paid Family and Medical Leave.

Be sure to read to the end – the Tax Credits are how employers get repaid the benefits that FFCRA requires them to pay employees.

Employers’ Notice Posting Requirements Under the FFCRA

As an initial note, the Department of Labor (DOL) has issued guidance on the FFCRA providing that employers with fewer than 500 employees are required to post a Notice of employees’ paid leave rights under the FFCRA conspicuously in their workplace. If some or all of an employer’s workers are working remotely, this notice requirement can be satisfied via email, regular mail, or a posting to the employer’s internal or external website. Employees who were recently laid off need not be provided with the Notice. The DOL guidelines will be the subject of another blog post in the near future.

The Emergency Paid Sick Leave Act (EPSLA)

The EPSLA requires employers with fewer than 500 employees to provide employees with Emergency Paid Sick Leave (EPSL), in addition to any leave accrued pursuant to the employer’s existing paid sick leave policy. An employee is entitled to use EPSL if the employee is unable to work or telework because they are:

1. Subject to a federal, state or local quarantine or isolation order
2. Advised by a health care provider to self-quarantine
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
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

Employees qualify for emergency paid sick leave regardless of the duration of their employment prior to the leave, and cannot be forced to exhaust other forms of accrued leave prior to using the new emergency paid sick leave. Employers must pay eligible employees for EPSL, but the FFCRA places caps on the amount:

• Full-time employees are to be paid for 80 hours at their “regular rate of pay” (as defined in the Fair Labor Standard Act) when the emergency paid sick leave taken for reasons 1 though 3 (limited to $511/day or $5,110 total per employee); and two-thirds of the employee’s regular rate of pay when leave is taken for reasons 4 through 6 (limited to $200/day, or $2,000 total per employee).
• Part-time employees are to be paid in the same manner, except the number of hours is based on the average number of hours worked over a two-week period.

The Emergency Family and Medical Leave Expansion Act (EFMLEA)

EFMLEA requires affected employers to allow eligible employees to take up to 12 weeks of paid leave if they are unable to work or telework due to the need to care for their minor child because the child’s school or childcare is unavailable due to Coronavirus-related reasons. The first 14 days (2 weeks) of the leave is unpaid, but the remaining 10 weeks must be paid at two-thirds of the employee’s regular rate of pay (limited to $200/day and $10,000 in the aggregate per employee). Note that an employee may elect to use ordinary accrued paid sick, vacation and/or PTO leave to cover the initial 10-day unpaid time period, and may also qualify for EPSLA.

Employers with 25 or more employees are required to return any employee who takes EFMLEA leave under this section to the same or an equivalent position upon the employee’s return to work. Employers with fewer than 25 employees are exempted from this requirement if they can show that, despite good faith efforts to restore the employee’s position, due to economic hardship no such position exists following the leave.

The DOL has advised that employers with fewer than 50 employees qualify for exemption from providing EFMLEA leave if it would “jeopardize the viability of the business as a going concern.” Employers seeking this exemption should document why their business meets this criteria.

Employer Tax Credits For Paid Leave under FFCRA

FFCRA includes crucial tax credit provisions intended to reimburse employers for mandatory employees’ paid leave benefits under the FFCRA. 100 percent of qualified (i.e. subject to the limits discussed above) sick and family leave payments made each quarter, through December 31, 2020, are exempt from the employer’s portion of payroll taxes. The credit is an offset to any payroll tax liability the employer has in the calendar quarter. Any excess amounts of paid leave above the employer-portion of the payroll taxes and deposit will be refunded to the employer. Employers should consult a tax professional regarding the full scope and limitations of these tax credits as they apply to their businesses.

Employers Who Shut Down Operations or “Furlough” Employees Need Not Provide FFCRA Leave

The DOL’s guidance provides that employees are not entitled to take paid sick leave or family and medical leave if their employer closes their worksite before, on or after April 1, 2020 (or if the business stays open on or after April 1, 2020, and employees are furloughed) if the business has been forced to shut down in response to a federal, state or local government directive.

Attorneys at Conkle, Kremer & Engel are monitoring the many legal implications of employers’ responses to COVID-19. CK&E is available to help businesses navigate compliance with the FFCRA, and other federal, state and local regulations intended to address the Coronavirus pandemic.