In response to the ongoing crisis caused by coronavirus, the Department of Labor is charged with implementing new emergency sick leave requirements that apply to all employers with under 500 employees, with some exceptions (see below). The new law goes into effect on April 2. Essentially, there are two parts to the new law:
- Mandatory emergency sick leave (and extended paid family leave) granted for employees subject to qualifying conditions created by the national response to coronavirus (listed below), and
- A payroll tax credit designed to offset the cost to employers of paying employees for this mandatory leave
Employers are free to grant emergency sick leave to employees before the April 2 effective date, but those wages will not count toward the tax credits available. If your employees have built-up sick leave or PTO, I suggest exhausting that first and saving the emergency sick leave for the period after which the credit kicks in.
Emergency Sick Leave & Paid Family Leave Requirements
Basically, the FFCRA says that all employers with under 500 employees (except those granted exemption by the DOL) must pay emergency sick leave (up to 80 hours, or two weeks) to employees if the employee is:
- subject to a federal, state or local isolation/quarantine order
- advised by healthcare provider to self-quarantine
- experiencing symptoms and seeking medical care
- caring for a family member who is under a federal/state/local order or recommendation by a healthcare provider to quarantine/isolate
- caring for a child whose school/place of care has been closed due to COVID-19
- experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services
Again, you are free to pay them emergency sick leave now, but those wages will not count toward the tax credits available.
Additionally, employers are required to pay up to an additional 10 weeks of paid family leave at 2/3 the employee’s regular rate of pay to employees who have been employed more than 30 days, who are unable to work due to childcare requirements in areas where schools and/or daycares have been closed due to coronavirus.
Payroll Tax Credit
The tax credit is slated to work as follows: If your employees take emergency paid sick leave, you can receive a tax credit up to the limits listed below to cover the wages you paid them. This credit covers 80 hours of paid sick leave for full-time employees, or the average number of hours worked over a two-week period for part-time employees.
The credit will be applied to an employer’s Social Security taxes (this reduces the federal tax payments made through Form 941 filings). Certain limits apply:
- For time an employee takes for #1-3 in the above list, the credit is capped at $511 per day and $5,110 total per employee.
- For time an employee takes for #4-6 in the above list, the credit is capped at $200 per day and $2,000 total per employee.
Again, we are waiting for guidance here on the implementation of the credit, and it will ultimately be up to payroll providers to implement this in their software systems to make sure it is done right. I would caution you to look over any Forms 941 for the next few cycles before filing them to make sure any credits due are being recognized on the returns.
Exemption for Small Employers
Small businesses with fewer than 50 employees — most of the people reading this — may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern. That said, the exemption depends on the authority of the Department of Labor, which hasn’t written the rules around the exemption yet. I assume there will be some sort of application process, but we just don’t know yet. Technically, the new law doesn’t go into effect until April 2, so there is still some time for the DOL to issue formal guidance.
Also important to note: In today’s press conference, Sec. Mnuchin said that the stimulus bill that just passed is based on a 10-12 week need, and that future bills can be crafted if the economic crisis looms longer than that timeframe. Based on everything going on, I expect that may be a likely scenario, which means there will probably be some sort of extension of the benefits provided under the FFCRA, whether in dollar amount or total hours applicable.