On March 18, 2020, President Trump signed into law the “Families First Coronavirus Response Act.” The new law was intended to provide temporary relief to employees and employers impacted by the coronavirus pandemic and includes, among other provisions, the following significant employment and tax provisions:
1. The Emergency Family and Medical Leave Expansion Act, which provides protected leave for employees unable to work or work remotely due to the need to care for a child under the age of 18 when the child’s school or day care is closed due to the coronavirus;
2. The Emergency Paid Sick Leave Act, which provides paid sick leave to employees to the extent an employee is unable to work or work remotely due to certain circumstances related to the coronavirus; and
3. Employer Tax Credits for Paid Family and Medical Leave and Paid Emergency Sick Leave.
There is some urgency to integrating the requirements of the new law into existing business practices. The new leave and paid leave requirements are set to commence April 2, 2020 and are currently scheduled to sunset December 31, 2020.
Emergency Family and Medical Leave Expansion Act (“EFMLEA”)
a. Which employers are covered? The EFMLEA broadly expands the Family Medical Leave Act (“FMLA”) and requires employers who have fewer than 500 employees to provide up to 12 weeks of protected leave during a Public Health Emergency (“PHE”). This significantly expands the employers who are covered by this leave as the prior version of FMLA applied only to employers with more than 50 employees. The Secretary of Labor has authority to issue regulations which will exclude employers with fewer than 50 employees if compliance with EFMLEA would jeopardize the viability of the business, but no such regulations have been issued at the time of this writing. Employers with fewer than 50 employees are not subject to suit by employees for failure to provide leave but could be subject to civil or administrative actions brought by the Department of Labor. An employer of an employee who is a health care provider or an emergency responder may elect to exclude such employees from EFMLEA leave.
b. Which employees are covered? Employees who have been employed for 30 days or more are eligible for EFMLEA leave. Existing FMLA leave required an employee to have been employed for 12 months and have worked for 1,250 hours in the previous 12 months.
c. When can an employee take leave? Leave may be taken if the employee is unable to work or work remotely because the employee’s child under the age 18 is not able to attend school or go to day care because of the coronavirus.
d. What notice must the employee provide? The employee must provide notice to the employer of the need to take leave but the EFMLEA is silent on required documentation that may be required. In the absence of more specific guidance, employers should ask that employees provide notice in writing setting forth the reason for leave.
e. Is the leave paid or unpaid? The first 10 days of the EFMLEA leave may be unpaid. After that time, an employee must be paid two-thirds of the employee’s regular rate times the number hours ordinarily worked per week. Paid EFMLEA leave per employee is capped at $200 per day and $10,000 in the aggregate. If the aggregate maximum is reached, the remainder of the 12 weeks leave may be unpaid. The employee may take paid time off (e.g. vacation) concurrently with the 10-day unpaid period, but the employer may not require this to be done.
f. What must an employer do to notify employees of the EFMLEA? Employers will need to post a new poster from the Department of Labor making the new leave known to employees. Employment policies should also be amended to reflect the new leave and employees must be notified of the new leave.
g. Must the employee be returned to the same position after the leave? The employee must be returned to the position the employee previously held unless the position no longer exists because of economic conditions caused by the public health emergency. If that condition exists, the employer must attempt, for one year, to return the employee to an equivalent position as the position previously held.
Emergency Paid Sick Leave Act (“EPSLA”)
a. Which employers are covered? All employers having fewer than 500 employees are covered. Similar to the EFMLEA, the Secretary of Labor has broad authority to exempt employers with fewer than 50 employees if the requirement to provide leave jeopardize the viability of the business, but no such regulations have been issued at the time of this writing. Employers of an employee who is a health care provider or and emergency responder may elect to exclude such employees from paid sick leave.
b. Which employees are covered? All full-time and part-time employees are immediately eligible with no minimum period of employment. Full-time employees shall receive the full 80 hours; part-time employees shall receive a number of hours equal to the number of hours that such employee works, on average, over a 2-week period.
c. When can an employee take leave? Employers must now provide up to 80 hours of paid sick leave for employees who are unable to work because:
(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 subparagraph (1) or has been advised as described in paragraph (2).
(5) The employee is caring for a child 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 child 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.
d. How much will an employee be paid during Emergency Paid Sick Leave? The amount of pay to which an employee is entitled depends on the coronavirus-related reason for the leave. Employees are entitled to full pay (not to exceed $511 per day or $5,110 in the aggregate) when they take the leave for reasons (1), (2) or (3) above. However, employees invoking this sick leave for reasons (4) or (5) are only guaranteed two-thirds pay (not to exceed $200 per day or $2,000 in the aggregate).
e. Can an employee use Emergency Paid Sick Leave to cover the first 10 days of EFMLEA leave that is unpaid? If an employee qualifies, the employee may use the Emergency Paid Sick Leave to cover the first 10 days of the EFMLEA leave that would normally be unpaid.
f. How does Emergency Paid Sick Leave work with other paid leave already offered by the employer? An employee may use Emergency Paid Sick Leave before using other paid time off. Conversely, an employer may not require the exhaustion of other paid time off before the employee is permitted to use the federal leave. Nor may an employer change the leave policies to permit less leave than previously provided by the employer.
g. What must an employer do to notify employees of the EPSLA? Notice of the availability of such leave must be posted by the employer. The Secretary of Labor is required to develop a model of the notice by April 25, 2020.
Employer Tax Credits for EFMLEA and EPSLA
a. Employers will be able to claim a refundable tax credit equal to 100% of the EFLMEA and EPLSA wages paid, along with certain qualified health plan expenses that are allocable to the wages paid, subject to the same caps that are imposed by the EFLMEA and EPLSA.
b. Self-employed individuals may receive refundable tax credits equal to 100% of the qualified family leave equivalent for EFMLEA and EPLSA.
c. Please be sure to get situation-specific advice from your tax advisor.
This client alert is intended to summarize significant employment and tax aspects of this new law and should not be relied upon as legal advice. Please consult with an SMDK attorney to provide you with advice specific to your situation.