Families First Coronavirus Response Act (“FFCRA”)
The recently passed Families First Coronavirus Response Act makes substantial changes to sick and FMLA leave for businesses and employees in 2020. The FFCRA provides new benefits to employees through two new laws: The Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act. The requirements of FFCRA are set to take effect April 2, 2020 and expire December 31, 2020. The FFCRA applies to employers of fewer than 500 employees. The Secretary of Labor may issue regulations to exempt businesses with fewer than 50 employees if compliance would jeopardize the viability of the business.
Covered Employers and EmployeesThe FFCRA covers private employers with fewer than 500 employees in the United States, the District of Columbia, or any Territory or possession of the United States. It does not affect private employers with over 500 employees. The FFCRA does not apply to laid off or terminated employees and if an employer closes a worksite prior to the FFCRA’s effective date of April 1, then an employee can’t get paid sick leave or EFMLEA leave. The Secretary of Labor can issue regulations to small businesses with fewer than 50 employees to be exempt when the payment requirements would jeopardize the viability of the business (as explained below).
The FFCRA requires emergency paid sick leave for employees who are not able to work remotely or telecommute as a result of COVID-19. Eligible Employees are those who have been employed for at least 30 calendar days. The following employees are covered under the emergency sick leave:
1.The employee is subject to a Federal, State, or local quarantine or isolation orders related to COVID-19
2.A health care provider has advised the employee to self-quarantine due to concerns associated with 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 subparagraph (1) or has been advised, as described in paragraph (2)
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 childcare 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
Paid Leave AmountThe FFCRA temporarily expands the coverage of the Family and Medical Leave Act (“FMLA”) in that it includes small-business employees be given the right to take up to 12 weeks of job-protected family leave if the employee or a family member is in coronavirus quarantine or if the school or child-care location of the employee’s child is closed due to the coronavirus. The first 10 days of leave are unpaid, but employees may choose to substitute any accrued vacation, personal, or sick days for the unpaid leave.
Employees who take leave for any of the first three qualifying reasons above are entitled to full, regular pay, for the leave period of 12 weeks, subject to a cap of $511 per day and $5,110 in the aggregate per employee. The fourth, fifth and sixth qualifying reasons above entitle employees to two-thirds (2/3) regular pay, subject to a cap of $200 per day and $2,000 in the aggregate per employee. The Emergency Paid Sick Leave Act provides paid sick leave for all employees whether they are full- or part-time, exempt or non-exempt. For Part-Time employees whose schedule varies from week to week and the employer is unable to with certainty determine the number of hours that would have been worked, the employer should use the average number of hours the employee was scheduled per day over the 6 month period preceding the Emergency Paid Sick Leave.
Documentation RequiredIf an employer intends to claim a tax credit under the FFCRA for the payment of the sick leave or expanded family and medical leave wages, you should retain appropriate documentation in your records. You should consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.
If one of your employees takes expanded family and medical leave to care for his or her child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19, you may also require your employee to provide you with any additional documentation in support of such leave, to the extent permitted under the certification rules for conventional FMLA leave requests. For example, this could include a notice that has been posted on a government, school, or daycare website, or published in a newspaper, or an email from an employee or official of the school, place of care, or childcare provider.
The Department of Labor is continuing to provide guidance as to what documentation is required and we will update this information as it becomes available.
Furloughs or Reduced HoursWhen an employer is open on or after April 1 but furloughs a worker, the employee cannot receive paid sick leave but may be entitled to unemployment insurance. If an employer reduces an individual’s hours, the person is not entitled to paid sick leave or expanded family and medical leave. However, an employee may take paid sick leave or expanded family and medical leave if a coronavirus qualifying reason prevents him or her from working a full schedule. Further, if your employer closes while you are on paid sick leave or expanded family and medical leave, your employer must pay for any paid sick leave or expanded family and medical leave you used before the employer closed.
Small Business Tax CreditsThe FFCRA grants a new tax credit to small employers to cover the now-required payments to employees who take time off under the new law’s emergency sick-leave and family-leave provisions. A small employer can collect a tax credit equal to 100% of qualified emergency sick-leave and family-leave payments made by the employer pursuant to the FFCRA. Importantly, the credit only covers leave payments made during the period beginning on a date specified by the Secretary of the Treasury, beginning on April 2, 2020 and ending Dec. 31, 2020.
Sick-leave and family-leave payments mandated by the FFCRA are exempt from the 6.2% Social Security tax component of the employer’s federal payroll tax that normally applies to wages. Employers must pay the 1.45% Medicare tax component of the federal payroll tax, but they can claim a credit for that outlay. The credit is not available to employers that are already receiving the pre-existing credit for paid family and medical leave under Internal Revenue Code Section 45S.
Small Business Exemptions and Return from LeaveSmall businesses with fewer than 50 employees are exempted from the paid leave requirements only if providing paid leave would jeopardize the viability of the business. In order to fall under these exemptions an employer must employ fewer the 50 employees and the leave requested the employee must be for a school closure or unavailability of child care issues due to COVID -19. If this is the case an authorized officer of the company must determine that either:
The cost of providing paid leave would exceed revenues and cause the business to cease operating at a minimal capacity;
The employee requesting leave has specialized skills, knowledge of the business or responsibilities such that their absence would cause risk to the financial health or operational capabilities of the business; or
The Company does not have sufficient workers to perform the job duties of the employee requesting leave and this work is necessary for the business to operate at a minimal capacity.
Further, employers with fewer than 25 employees are not required to restore employees to the same or equivalent position on return from family leave if the employee’s position no longer exists due to economic conditions or operating changes caused by ongoing public health emergency and the employer makes reasonable efforts to restore the employee at that time and over a one-year period.
Restriction on Employers and ProhibitionsEmployers may not discharge, discipline, or discriminate against any employee who takes paid sick leave under the FFCRA, and files a complaint or institutes a proceeding under or related to the FFCRA. Further, an employer cannot require the employee to find a replacement worker as a condition of receiving paid sick time. An employer also may not require an employee to use other paid leave provided by the employer before the employee uses the paid sick time available under this Act.
The Department of Labor has indicated that it will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the FFCRA. Under this policy, Department of Labor will not bring an enforcement action against any employer for violations of the act so long as the employer has acted reasonably and in good faith to comply with the act. The Department of Labor stated it will instead focus on compliance assistance during the 30-day period.
However, it is important to note that a failure to provide sick leave or retaliation for exercising rights under the FFCRA will be subject to the penalties under the FLSA. This includes a fine of not more than $10,000 and/or imprisonment of not more than 6 months. Either the Secretary of Labor or the employee may also bring a lawsuit for the unpaid leave, an equal amount as liquidated damages, equitable relief, attorneys’ fees and costs, and for injunctive relief.
Employers with policies that provide paid leave already must still provide this additional allotment of paid sick time. Employers may not change their policies to try to avoid granting the paid leave.
Self-Employed IndividualsSelf-employed workers, including independent contractors, are not eligible employees under the Emergency Paid Sick Leave Act and the temporary expansion of the Family and Medical Leave Act. The FFCRA allows you to claim a refundable credit against your federal income-tax bill, including the self-employment tax hit. If the credit exceeds your bill, the government will issue you a payment for the excess.
You can also claim a coronavirus emergency family-leave credit for up to 50 days. The credit amount would equal the number of qualified family-leave days multiplied by the lesser of 1) $200 or 2) your average daily self-employment income. The maximum total family-leave credit would be $10,000 (50 days times $200 per day). The credit only covers leave payments made during the period beginning on a date specified by the Secretary of the Treasury, beginning on April 2, 2020 and ending Dec. 31, 2020.