On Wednesday, President Trump signed the Families First Coronavirus Response Act (H.R. 6201), which was passed by the Senate earlier that day. Mr. Mnuchin, the U.S. Secretary of Treasury, stated that the law is only the second in what is likely to be multiple legislative efforts to protect the economy—including workers and businesses—from the fallout of the spreading Coronavirus.
The sick day provisions would be effective no later than 15 days after the date of enactment, which would be April 2, 2020, and would expire on December 31, 2020.
The terms of the law are described below.
The bipartisan law provides for emergency paid-leave provisions that would require employers to provide paid sick time for the following reasons:
(1) The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
(3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
(4) The employee is caring for an individual who is subject to an order as described in reason for use (1) or has been advised as described in reason for use (2) (as described above).
(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions.
(6) The employee is 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.
This requirement exempts employers with more than 500 employees from the paid-leave requirement. However, all employees, regardless of the duration of employment or full- or part-time status, are eligible if they meet one of the above-listed reasons.
Full-time employees would be eligible for up to 80 hours of paid emergency leave. Part-time employees would be eligible to receive the number of hours worked, on average, over a two-week period. The leave would terminate immediately once the reason for the leave has ended, and the employee would have to return to work for his or her next scheduled shift.
Employers are required to post a notice of the new law with their other required postings. The Secretary of Labor will make a model notice available within seven days. The Emergency Paid Sick Leave Act states that employers must provide paid sick time immediately (as opposed to the 10-day waiting period in the FMLA Expansion).
This law also expands FMLA rights for the duration of the pandemic crisis. This law would apply to all employers with less than 500 employees. There is no minimum employee number. Employees with less than 50 employees may be eligible for an exemption if the obligations would jeopardize the viability of the business as a going concern. What that means is still unclear.
This law would expand employee FMLA under this situation to those employees who have been employed for at least 30 days. Normal FMLA requirement is 1,250 hours over a 12-month period.
An employee can take leave for caring for an “individual.” This term “individual” is, though, undefined. In the original House bill, the term was very expansive to include grandparents, domestic partners, etc.
FMLA eligibility has been expanded to cover a “qualifying need related to a public health emergency.” This situation is defined as “[i]Instances where the employee 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 emergency.” Note that this include situations of telework.
This law does have a special rule which would allow an employer who is a health care provider or an emergency responder to exclude employees from the new amendments to the FMLA.
How Paid Leave Works
The first 10 days for which an employee takes leave could consist of unpaid leave. An employee could elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave. Employers could not require the employee to make the substitution.
After the 10, days, employers would be required to pay for the leave an amount that is not less than 2/3 of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work or the number of hours calculated for employees who have varying schedules. For full-time employees, it would be a total of 80 hours. Part-time employees would receive a prorated amount.
It is unclear whether intermittent leave is allowed under this law.
In addition, there are special rules for multi-employer plans that appear to give these employers more compliance flexibility than is provided to other employers.
Amount of Pay
The amount of pay depends on which reason the time off is used. Specifically, covered reasons (1) through (3) above must be paid at the 100% rate, while covered reasons (4) through (6) above can be paid at the 2/3 rate.
In addition, PST payments can be capped as follows: (I) $511 per day and $5,110 in the aggregate for covered reasons (1) through (3) and (II) $200 per day and $2,000 in the aggregate for covered reasons (4) through (6). However, while an employer appears able to pay an employee an amount that is greater than the above caps, the employer would not receive any corresponding additional tax credit.
The paid leave can be capped at $200 per day and $10,000 in the aggregate.
As a general rule, an employee who is taking FMLA must have their job restored. However, the law’s job restoration requirements (in Section 104(a)(1) of the FMLA) would not apply to employees of an employer with fewer than 25 employees where the following conditions are met:
A. The employee takes leave under the public health emergency provision;
B. The position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer that affect employment and are caused by a public health emergency during the leave period;
C. The employer makes reasonable efforts to restore the employee to a position equivalent to the position that the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment;
D. Where the employer’s reasonable efforts under subparagraph (C) fail, the employer makes reasonable efforts for a one-year period beginning on the earlier of the date of the qualifying need or 12 weeks following the leave’s commencement, to contact the employee if an equivalent position becomes available.
Accrual of Paid Sick Leave
Employee Notice to Company
Accrued paid sick leave would not carryover from one year to the next.
When an employee uses public health emergency leave related to school or childcare closures (see above) and the leave is foreseeable, an employee must provide the employer with such advance notice of leave as is practicable. Otherwise, notice is similar to FMLA notice (which in practice is at the time or after the employee has need for it).
Coordination with other Leave Policies
Employers are required to post a notice of the new law with their other required postings. The Secretary of Labor would make a model notice available within seven days of the date the law is enacted.
The sick leave provided would be in addition to any existing employer-provided sick leave and employers may not change such paid leave policy on or after the date of enactment to avoid the provision. In addition, an employer could not require, as a condition of providing paid sick time that the employee involved search for or find a replacement employee to cover the hours during which the employee is using paid sick time.
Further, an employer may not require an employee to substitute any [public health emergency] leave.
Employees could use the additional sick time first. An employer could not require an employee to use other paid leave provided by the employer before the employee uses the paid sick time.
This law does not preempt any state or local paid sick leave laws; therefore, employers need to be careful of not violating those laws which may be even broader for usage in this situation. For example, Michigan Paid Medical Leave would also apply in this situation, and in the case of school closures. It is unclear whether it would run concurrently or in addition with this leave.
Refundable Tax Credits
The law would provide refundable payroll tax credits, subject to certain limitations, through 2020 to employers to cover wages paid to employees while they take time off under the bill’s sick leave and family leave programs, for up to 10 days. The sick leave credit would be for wages up to $511/day or $200/day if the sick leave is to care for a family member or child following the child’s school closing. The family leave credit would be for wages up to $200/day ($10,000/maximum) while the employee is receiving paid leave.
The bill would also provide for a similar refundable credit against the self-employment tax for up to 10 days. One difference between employer and self-employed is that self-employed individuals could receive a family leave credit for as many as 50 days multiplied by the lesser of $200 or their average self-employment income.
In determining the total amount of an employer’s qualified sick leave wages paid for a calendar quarter, the total number of days that the employer can take into account with respect to a particular employee for that quarter cannot exceed 10 days minus the total number of days taken into account with respect to such employee for all previous quarters.
The amount of the paid sick leave credit that is allowed for any calendar quarter cannot exceed the total employer portion of FICA Tax imposed on all wages paid by an employer to all of its employees during such quarter. If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is treated as an overpayment of tax by the employer, the same as if the employer had actually overpaid the employer’s portion of FICA Tax. Accordingly, the IRS will pay or credit to the employer the amount of the deemed overpayment. Also, an employer who receives a credit for PST must include the amount of the credit in gross income.
This approach is intended to prevent the employer from realizing a double benefit (i.e., a windfall) -- one being the receipt of the credit and the other being a tax deduction for the paid sick leave wages. This will not nullify the tax credit, but by adding the amount of the credit to gross income, it offsets the tax deduction.
An employer must exclude any wages taken into account in determining the paid sick leave credit when determining the paid family and medical leave tax credit under Internal Revenue Code Section 45S. For any discussion of tax credits, please refer to your accountant and legal counsel.
Cashflow to Cover FMLA Paid Leave by Small Businesses
Mr. Mnuchin said employers will be able to use cash deposited with the Internal Revenue Service to pay sick-leave wages. For businesses that wouldn’t have sufficient taxes to draw from, the Treasury would make advances to cover the costs, he said. Further, the IRS is expected to release guidance for waiving tax deadlines because of the Coronavirus such as quarterly payments, etc. These actions go further than what has happened in the past during other crises. “We are hearing feedback that certain small businesses are concerned about the burden of this,” Mr. Mnuchin said on Fox News Sunday, referring to the House bill. “We were very focused [that] we need to get the money to the people quickly. We don’t want them to have to deal with the big bureaucracy.”
Additional ASE Coronavirus Resources
Webinar: Building Trust Virtually – Join us on Friday, March 20 at 10:00 a.m. for a webinar on Prelude Suite: an experiential learning platform and method for supporting virtual teams. Learn how you can improve self‐awareness, better understanding of teammates, better communication, appreciation of diverse strengths, shared vision of excellence, better task alignment, positive emotional climate, and psychological safety of your teams virtually. This webinar will be presented by kd3worz Consulting & Training. Learn more or register here.
Webinar: Michigan UIA and How to Utilize Benefits for Your Employees During the Pandemic – ASE is pleased to present, in conjunction with the Michigan Unemployment Insurance Agency, a complimentary webinar this Monday, March 23 at 1 pm. This webinar will present details on what employers need to know about using the unemployment benefits system to support their workers at this time and whether slowdowns and work stoppages resulting qualify employees for unemployment benefits. This informational webinar will also cover the following unemployment compensation program topics:
- Work Share Program
- Temporary Layoff Waivers
- Employer Filed Claims (EFC)
- Trade Adjustment Assistance
To register, click here.
Webinar: Legal and Compliance Issues Around the COVID-19 Pandemic – The legal and compliance implications around the COVID-19 pandemic are evolving quickly. On March 26th, ASE will be hosting an informational webinar on some of the most timely and topical legal issues presented by this pandemic. During this online session, attorneys from Fragomen Del Rey, Bernsen & Lowey, PLLC and Barnes & Thornburg, LLP will discuss COVID-19’s effect on employment landscape as well as immigration and mobility. Topics discussed will include:
- Understanding compliance issues and obligations under applicable state and federal laws.
- Understanding current immigration and mobility related issues including the status of current travel restrictions.
For more information or to register, click here.
Course: Managing a Virtual Workforce – As employers implement remote work in response to the pandemic, ASE’s Managing A Virtual Workforce is scheduled for Thursday, April 2. Participants will learn the benefits and challenges of virtual work and the benefits to employers and employees. The importance of strong, engaged management will be discussed along with effective management practices to assure successful virtual teams. Learn more or register here. Note - this class will become a virtual class over two days. More information coming soon.
COVID-19 Compensation Practices Survey - ASE conducted a survey to discover what actions employers are taking in response to Coronavirus with regards to employee compensation. Results can be found here.
McLean & Company - ASE members have access to a suite of tools from McLean & Company to help you manage your organization during this worldwide pandemic. Members can access the McLean & Company tools and resources here. Login via the ASE Member Dashboard is required.
ASE Virtual Work Resources - ASE has created a Virtual Work Resources web page that can be found here.
ASE Coronavirus Updates – ASE has created a Coronavirus web page with important links and information that is updated daily. The page can be found here .
Sources: Wall Street Journal 3/15/20, Seyfarth Shaw 3/16/20, Clark Hill 3/15/20, Proskauer 3/14/20