COVID-19 Update:

Families First Coronavirus Response Act

On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (the Act) to address mandated sick leave and mandated paid leave for those infected with or directly affected by COVID-19. The Act will take effect no later than 15 days after enactment and will remain in place until the end of 2020.

To offset wages paid under this law, employers will receive a tax credit, reducing their payroll tax cost. The Act does not prohibit employers from paying benefits in excess of these required amounts (see summaries below); it just mandates these minimum amounts of sick and paid leave to employees in certain circumstances.

Here are some highlights in the Act:

Sick Leave

Full-time employees of companies with less than 500 employees (and government employees) are now provided up to 80 hours of sick leave. Part-time employees are also eligible based on the number of hours they would typically work in a two-week period. This is applicable regardless of the duration of their employment.

The sick leave amount is based on the employee’s “required compensation” (i.e., the greater of (i) the regular rate of pay, (ii) the federal minimum wage, or (iii) the local minimum wage) multiplied by the number of hours normally scheduled to work, but capped at (i) $511 per day ($5,110 in total).

An employee is eligible if:

The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis

The employee has to go into quarantine because the employee is diagnosed with COVID-19, or

The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19

Paid Leave

Alternatively, employees are entitled to paid leave in the following circumstances and must receive the lesser of 2/3rds their regular pay or $200 per day (capped at $2,000 per affected employee):

The employee is caring for an individual who is subject to quarantine or self-quarantine as above

The employee is caring for his or her child if the school or place of care of the child has been closed, or the childcare provider is unavailable, due to COVID-19 precautions, or

The employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from these provisions

Employers cannot require employees to use any existing paid leave first. The Department of Labor also has the authority to announce rules that allow employers of health care providers and emergency responders to opt out of the paid sick leave mandate.

Family and Medical Leave Expansion Act

Employees eligible for this emergency paid leave also may qualify for the new Family and Medical Leave Expansion Act expansion (FMLA) of paid leave (for weeks three through twelve.) The first two weeks are unpaid under FMLA, but under the new law (see above), those weeks would already be covered.

Employees are eligible for the FMLA expansion of benefits if the employee is unable to work because they are required to care for their child age 18 or younger. This benefit applies if their child’s school has been closed, or if the childcare provider is unavailable due to a public health emergency with respect to COVID-19, as declared by a federal, state, or local authority.

This applies even to employees of companies with less than 50 employees that are not otherwise required to offer FMLA benefits. The Department of Labor has the authority to issue regulations exempting businesses with fewer than 50 employees from the expanded paid FMLA requirements when the imposition of such requirements would jeopardize the viability of the business as a going concern.

FICA and Medicare Taxes Do Not Apply

Wages paid because of the Emergency Paid Sick Leave Act, and the Emergency Family and Medical Leave Expansion Act are NOT subject to FICA or Medicare tax.

Employer Payroll Tax Credits

The Bill provides for refundable tax credits to employers equal to the mandated benefits to compensate employers for payments made to affected employees. The credit is applied against the employer’s share of FICA and Medicare tax liability for the quarter in which the sick leave wages are paid. If the total sick leave payments made by the employer exceed its share of such taxes, the difference is refundable. The specific timing of when an employer can reduce payroll tax deposits to take advantage of this credit is uncertain at this time.

Like employee benefits, self-employed taxpayers are allowed a credit against self-employment tax. However, the credit is subject to the daily limit of 2/3rds of average daily self-employment income, or $200. The Bill requires self-employed individuals to maintain documentation to establish self-employment eligibility as prescribed by the Secretary of the Treasury.

We wait for additional clarification from federal agencies, such as the timing of the payroll tax credits, to offset the cash outlay required of employers.

In the meantime, please reach out to your Whittlesey Advisor to discuss in more detail.

Disclaimer: Our content, comments, and answers to questions should not be construed as specific advice for your particular situation. The statutes and rules related to the SBA lending provisions and other programs are complex and you should consult with your financial and tax advisors for guidance regarding the application of the law to your particular facts and circumstances.