On March 18, 2020, Congress enacted the Families First Coronavirus Response Act H.R 6201 which includes the Emergency Family & Medical Leave Expansion Act (EFMLEA) and the Emergency Paid Sick Leave Act (EPSLA).
For both of these Acts:
- The Department of Labor (DOL) can exempt small businesses with fewer than 50 employees from these requirements when the imposition of such requirements would jeopardize the viability of the business as a going concern. Emergency guidance is forthcoming from the DOL on the small business exemption.
- The DOL shall have the authority to issue regulations for good cause to exclude certain health care providers and emergency responders from the definition of eligible employee. Refer to H.R. 6201 Section 3102 (b)(a)(3)(A), Section 3105, and Section 5111 (1).
Emergency Family & Medical Leave Expansion Act (EFMLEA) requires employers with less than 500 employees to provide both paid and unpaid leave to certain employees through December 31, 2020 if certain criteria are met.
- Employee must be employed for at least 30 days.
- Employee must be unable to work or telework due to care for a dependent under the age of 18 if the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency declared by a Federal, State or local authority.
- The first 10 days of leave under this Act may consist of unpaid leave, after which paid leave is required. The paid leave is for a maximum of 10 weeks.
- An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave.
- The amount of required paid leave will be calculated on no less than two-thirds of an employee's regular rate of pay and the number of hours an employee would have worked. In no event shall such paid leave exceed $200 per day and $10,000 in the aggregate.
- In any case where the necessity for leave under this Act is foreseeable, an employee shall provide the employer with such notice of leave as is practicable.
- Employers will be allowed a refundable tax credit for each employee limited to $200 per day with a maximum of $10,000. See additional information below regarding this credit.
- Self-employed individuals will be allowed a tax credit for the lesser of $200 or 67% of their average daily self-employment income for up to 50 days.
Emergency Paid Sick Leave Act (EPSLA) requires private employers with less than 500 employees and public employers of any size to provide paid sick time to employees through December 31, 2020. EPSLA takes effect not later than 15 days after March 18, 2020 if certain criteria are met.
- Full time employees who are unable to work or telework due to COVID-19 specified reasons listed below must be provided with 80 hours of pay.
- Part-time employees who are unable to work or telework due to COVID-19 specified reasons listed below must be provided with sick pay based on their average hours worked in a two week period.
- This applies to all employees regardless of length of employment and is immediately available.
- Employees are compensated at their regular rate (up to a maximum of $511 per day or $5,110 total) in the following cases:
- Employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
- Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- Employees are compensated at two-thirds their regular rate (up to $200 per day or $2,000 total) in the following cases:
- Employee is caring for an individual subject to a quarantine order or isolation order.
- Employee is caring for an individual who was advised by a health care provider to self-quarantine.
- Employee is caring for an individual experiencing symptoms of COVID-19 and is seeking a medical diagnosis.
- Employee is caring for a dependent child whose school is closed or child care provider is unavailable due to COVID-19 precautions.
- Employee is experiencing any other substantially similar condition as specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
- An employer may not require, as a condition of providing paid sick time under this Act, that the employee involved search for or find a replacement employee to cover the hours during which the employee is using paid sick time.
- An employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses the paid sick time under this Act.
- After the first workday (or portion thereof) an employee receives paid sick time under this Act, an employer may require the employee to follow reasonable notice procedures in order to continue receiving such paid sick time.
- Employers will be allowed a refundable tax credit for wages paid under the EPSLA equal to the lessor of the amount of the employee's leave pay or either (1) $511 per day/$5,110 in the aggregate for those on leave because of their own health issue, or (2) $200 per day/$2,000 in the aggregate for those caring for others. See additional information below regarding this credit.
- Self-employed taxpayers are allowed a refundable tax credit in the amount of the lesser of the average daily self-employment income or either $511 per day if the self-employed individual is affected by COVID-19 or $200 per day if the self-employed individual is caring for a family member affected by COVID-19.
Employer Refundable Tax Credits
- Per IRS Newswire IR-2020-57 dated March 20, 2020, "under guidance that will be released next week, eligible employers who pay under either of the above Acts will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able to file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week."
- The IRS is developing changes to the quarterly Form 941.
- The amounts of the EPSLA and EMFLEA credits are increased by the portion of the employer's "qualified health plan expenses" that are properly allocable to qualified sick leave wages or qualified family and medical leave wages. Qualified health plan expenses means amounts paid or incurred by the employer to provide and maintain a group health plan, but only to the extent that such amounts are excluded from the gross income of employees.
- The credits allowed to employers for wages paid under the EPSLA and EFMFLEA are increased by the amount of the tax imposed by Code Section 3111(b) (the 1.45% hospital insurance portion of FICA) on qualified sick leave wages, or qualified family leave wages, for which credit is allowed under Act Section 7001 or Act Section 7003. (Act Sec 7005(b)). The credits are refundable to the extent they exceed the employer's payroll tax.
- Employer FICA exclusion - Wages paid under the EPSLA and EFMFLEA are not considered wages under Code Section 3111(a) (employer tax - old age, survivors and disability insurance portion of FICA; 6.2%).
Notice to Employees - Employers shall post and keep posted, in conspicuous places on the premises where labor law posters are customarily posted, a notice, to be prepared or approved by the Secretary of Labor, of the requirements described in this Act. The Secretary of Labor shall make publicly available a model of a notice that meets this requirement not later than 7 days after the enactment of this Act.
Retirement Plan Withholding - Our observation is each employer should reference your retirement plan document to determine if retirement plan withholding is required on family leave or sick leave paid to employees under these Acts.
Axley & Rode will post additional alerts when tax law changes are enacted. In the interim, please contact your Axley & Rode advisor with any questions or if you require any additional information.
