Photo by Netania Moore
Raphael Moore, JD, LLM, is general counsel of the Veterinary Information Network.
The federal government passed the Families First Coronavirus Response Act on March 18. The law goes into effect April 1.
The act does a number of things, including, under two separate main provisions, providing a funding source for various assistance programs and paid leave to employees. This article summarizes the two provisions — which are called the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act — along with the tax-credit system aimed at reimbursing employers for 100% of the related costs.
Emergency Family and Medical Leave Expansion Act
As a quick refresher, the Family Medical Leave Act (FMLA) is a federal law that normally requires employers that have 50 or more employees to provide up to 12 weeks of unpaid leave for specific family and medical reasons, such as the birth of a child or a serious health condition, all while protecting their job so that they can return to it when the leave is over.
This part of the new law changes how the FMLA functions through Dec. 31, 2020. Specifically:
- It adds a new qualifying reason for an employee to seek FMLA leave. An employee can now take emergency leave of up to 12 weeks if they are unable to work or telework because they must take care of their own minor child if the child's school or child care provider is closed due to a public health emergency.
- For this new type of leave, it changes the employee count threshold from 50 or more employees, to now covering all employers with fewer than 500 employees.
Note: The law allows the possibility of regulations that exempt businesses with fewer than 50 employees if the requirement jeopardizes the viability of the business. As yet, there are no regulations in effect. Stay tuned for updates.
- It lowers the eligibility requirement so that any employee who has worked at least 30 days prior to the first day of leave is eligible for this new leave.
- Unlike other categories of FMLA leave, this new qualifying emergency leave is a paid leave. Employers may choose to not pay the first 10 days of leave — a period that could be covered under the Emergency Paid Sick Leave Act, another provision in the new law — and instead substitute any accrued paid time off, such as vacation or sick leave, during that period. After 10 days, the employer must pay employees for the leave, with the following stipulations:
- Full-time employees are to be paid ⅔ of their regular rate based on the number of hours the employee would otherwise have been normally scheduled — capped at $200 per day and $10,000 in aggregate per employee.
- Part-time employees are to be paid based on the average hours the employee worked during the six months before taking emergency leave. For employees who have worked fewer than six months, the calculation is based on their reasonable expectation of average hours to be scheduled, when they were hired.
- When employees return from emergency leave:
- Employers with 25 or more employees must restore the jobs of staff who return from leave, per normal FMLA rules, providing the same pay and benefits they earned prior to going on leave.
- Employers with fewer than 25 employees generally are excluded from the requirement to restore the job if the position no longer exists due to an economic downturn, etc., caused by the public health emergency during the leave. The law still requires the employer to make reasonable attempts to return the employee to an equivalent position for up to a year following leave.
Regular FMLA standards still apply for the traditional type of leave that is unrelated to this new qualifying event. So, if an employee has any serious health condition, whether COVID-19 or anything else, they may be entitled to unpaid leave of up to 12 weeks and protection of their job, just as before. Also, this new qualifying reason doesn't add or change the existing leave count: Employees still have a combined total of 12 weeks of FMLA leave regardless of why the leave is taken, so if they already have used some leave for another qualifying reason (e.g., any serious health condition), they would have only the remaining period available now.
Emergency Paid Sick Leave Act
This is the other substantial change in law that also applies through the end of the year. Under the new legislation, an employee is allowed to take paid sick leave in a number of COVID-19-related circumstances.
The law applies to all employers with fewer than 500 employees and requires them to provide full-time employees up to two weeks (80 hours) of paid sick leave at their regular rate of pay, or at ⅔ of their rate of pay, depending on the reason for their absence (see below).
- Full-time employees are eligible for paid sick leave at the full rate of pay if they:
- are quarantined due to federal, state or local law
- are advised by a health care provider to self-quarantine because of the virus
- have COVID-19 symptoms and are seeking a medical diagnosis
- Full-time employees are eligible for paid sick leave at ⅔ of their rate of pay if they are:
- caring for an individual (not limited to family members) who meets either of the above requirements; or
- caring for their own child if the child's school or place of care is closed due to public health emergency
- Part-time employees also are eligible, based on the average number of hours worked for the six months prior to taking the leave (and for those who have worked for fewer than six months, the calculation is based on the average number of hours worked over a two-week period).
- Paid sick-leave wages are capped.
- If for the employee's own use, they are limited to $511 per day up to $5,110 per employee.
- If to care for others, they are limited to $200 per day up to $2,000 total.
- The coverage is in addition to any paid sick leave already provided by the employer and cannot carry over to the next year.
To coordinate time off between the emergency FMLA leave and the emergency sick paid leave, an employee is allowed to request pay for the two weeks (80 hours) of emergency sick leave instead of the initial 10 days of unpaid leave under the revised FMLA system.
How will employers be reimbursed?
The intent of the new law is to reimburse employers for 100% of the wages they pay their employees under the above two programs. This is done through a system of refundable tax credits. (A "refundable" tax credit is one in which you receive a refund even if the amount is more than what you owe in taxes.) This is somewhat complex but basically functions like this:
- The tax credit is allowed against the employer portion of Social Security taxes. This, of course, limits the application of the credit.
- Because of this limitation, employers will be reimbursed if their costs under either of the two programs (emergency family leave or emergency sick leave) exceed the Social Security taxes they would owe.
- The reimbursement is provided through a refundable tax credit equal to 100% of the qualified wages paid for each calendar quarter. Therefore:
- Under the Emergency FMLA leave, it would mean up to $200 per day for each individual, up to $10,000 total per calendar quarter.
- Under the Emergency Paid Sick Leave Act, that would mean up to $511 per day (or $200 per day if caring for another), for up to 10 days per employee in each calendar quarter.
The exact mechanism of the credits/refunds is awaiting regulations that are being drafted. The expectation is that the credits will go against monthly/quarterly installments paid by the employer, thus reducing the taxes owed. That means payroll companies will need to quickly revamp their systems to accommodate these new leaves to keep track of the wages paid and payroll taxes owed, and your tax preparer will need to offset your quarterly taxes by the amounts that exceed payroll taxes. As soon as we know more about how this mechanism works, we will provide an update.
Note that these tax credits are the reason that employers with 500 or more employees are not covered — they are expected to be able to fund their own sick and family leave without needing the U.S. taxpayer to subsidize such benefits.
The regulations being drafted also are expected to deal with the much desired exemption for smaller employers, as well as the requirements for notifying employees about the new law. The Secretary of Labor must provide a model notice by March 25. (Update: The DOL has issued its guidance for small employers. See summary here.)
March 25 update: This story has been changed to reflect a earlier effective date on the law, as provided in new information from the U.S. Department of Labor (DOL). For a rundown of DOL's just-issued "compliance assistance," click here.
March 26 update: The DOL and IRS have issued further clarifications, details and materials on the new law. See summary here.
March 30 update: More guidance from the DOL is summarized here.
April 1 update: The DOL has issued guidance on the exemption for small employers. See summary here.
April 5 update: The DOL has issued the underlying regulations implementing the Families First Coronavirus Response Act. See summary here.
About the author: Raphael Moore, JD, LLM, has been general counsel of the Veterinary Information Network since the 1990s. He enjoys figuring out esoteric legal issues and is a frequent contributor to VIN legal and practice management discussions. An avid hiker, he has a knack for being attacked by bears in Yosemite. He lives with his wife and two daughters in their geodesic dome on the outskirts of Davis, California, where he raises alpacas and chickens.