(Employees, Employers, Self-Employed)
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act, which includes the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act (collectively, the “FFCRA”). The FFRCA allows employers to keep their workers on their payrolls and to ensure that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus. The FFCRA is effective for leave requested from April 1, 2020, through December 31, 2020.
The 6 Conditions
An employer shall provide each employee paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave for the following conditions:
The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.
The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
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).
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.
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 Sick Leave for Employees
Employees can receive paid sick time for the number of hours they would have worked if they were not sick up to 2 weeks (10 business days).
Full time employees will receive paid sick leave for up to 80 hours.
Part Time employees will receive paid sick leave for the number of hours normally worked on average, over a 2-week period.
For part time employers who schedules vary from week to week. Hours are based on a number equal to the average number of hours that the employee was scheduled per day over the previous 6-month period. o Pay is calculated based on the employee’s required compensation including tips and commissions for those taking time off to care for themselves.
Those that are taking care of family are paid two-thirds the employee’s regular rate. Overtime hours are included, but not premium overtime pay.
Employees that have been employed for at least 30 days can take up to an additional 10 weeks of qualifying leave to take care of a minor child. (section 5)
An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the first two weeks of partial paid leave under this section.
Paid sick time under this section shall not carry over from 1 year to the next. It is only applicable for year 2020.
The good news about this provision is that an employer may not require the employee to search for or find a replacement employee to cover the hours during which the employee is using paid sick time. This provision allows for immediate use and applies to all employees regardless of the length of employment.
Don’t worry about the repercussions of taking advantage of this time. If you are sick you should utilize this time to get better. The act prohibits an employer from discharging, disciplining, discriminating against any employee who
takes leave in accordance with this Act; and
has filed any complaint or instituted or caused to be instituted any proceeding under or related to this Act (including a proceeding that seeks enforcement of this Act), or has testified or is about to testify in any such proceeding.
How It Works for Employers
FFCRA is designed to put small- and medium-size employers on the same footing as large employers who already provide similar paid leave to their employees.
Complete Coverage – Employers receive 100% reimbursement for paid leave pursuant to the Act.
o Health insurance costs are also included in the credit.
Employers face no payroll tax liability. Paid leave for those affected by Covid-19 is not considered wages.
An immediate dollar-for-dollar tax offset against payroll taxes will be provided.
o Including withheld federal income taxes, employee share of SS and Medicare taxes, and employer’s share of SS and Medicare taxes with respect to all employees.
Where a refund is owed, employers can obtain an expedited advance from the IRS by submitting a streamlined claim form.
Self-employed individuals receive an equivalent credit.
What Type of Entities Are Eligible?
It applies to certain public employers, and private employers with fewer than 500 employees.
Who is Exempt?
Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
Employers of employees that are health care providers or emergency responders can elect out of the paid sick leave requirement.
Paid Sick Leave Credit for Individual (Sections 1 – 3)
Employers may receive a refundable sick leave credit for employee’s regular rate of pay, up to $511 per day and $5,110 max for the two weeks, for a total of 10 days.
Part time employees are eligible for leave based on a 6-month average of the average number of hours worked over a 2-week period.
Paid Sick Leave Credit for Family (Sections 4 – 6)
Employers may claim a credit for two-thirds or 67% of the employee’s regular rate of pay at the number of hours the employee would otherwise be normally scheduled to work up to $200 per day ($2,000 Max), for up to 10 days.
o Regular rate of pay part time employers who schedules vary from week to week. Hours are based on a number equal to the average number of hours that the employee was scheduled per day over the previous 6-month period.
Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Compensation should not be less than the minimum wage rate in effect in that state or locality or the employee’s regular rate of pay.
Things to Note
In no event shall paid qualified family leave exceed $200 per day and $10,000 in the aggregate with respect to all calendar quarters. That means up to 10 weeks of qualifying leave can be counted towards the family leave credit.
The amount of the credit is includible in income so there is no double benefit.
Employers cannot use both the payroll tax credits and credits under the family and medical leave program established in the 2017 TCJA. No double dipping.
How to Apply the Credits
Eligible employers who pay qualifying sick or childcare leave can claim the sick leave/childcare leave credits on their federal employment tax returns (e.g., Form 941). However, employers can more quickly benefit from the credits by reducing their federal employment tax deposits.
o If the tax credit exceeds the amount of employment tax for the quarter, the excess is treated as an over payment and will be refunded by the IRS to the employer.
If there are insufficient federal employment taxes to cover the amount of the credits, the employer may request an advance payment of the credits from the IRS by submitting a Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Self-employed individuals will claim the credit on their income tax return and reduce estimated tax payments
If an eligible employer paid $10,000 in sick leave and is otherwise required to deposit $13,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $10,000 of the $13,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $8,000 in sick leave and was required to deposit $6,000 in taxes, the employer could use the entire $6,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
A self-employed individual is eligible for the same benefits if the individual regularly carries on any trade or business and would be entitled to leave as if the individual were an employee of an employer (other than himself or herself).
The max number of days are not to exceed 50 days during the taxable year that the individual is unable to perform services in any trade or business.
AVERAGE DAILY SELF-EMPLOYMENT INCOME. —For purposes of this subsection, the term ‘‘average daily self-employment income’’ means an amount equal to the net earnings from self-employment of the individual for the taxable year, divided by 260.
Personal Use Credit
May claim a credit for the average daily self-employment income of the individual for the taxable year up to $511 per day and $5,110 max for the two weeks, for a total of 10 days.
Family Leave Credit
May claim a credit for two-thirds or 67% of the average daily self-employment income of the individual for the taxable year up to $200 per day ($2,000 Max), for up to 10 days that the individual is unable to perform services in any trade or business.
Eligible employers claiming the credits for qualified leave wages must retain records and documentation related to and supporting each employee’s leave to substantiate the claim for the credits, and retain Forms 941 and 7200 and any other applicable filings made to the IRS requesting the credit.
If the employer fails to provide FMLA or sick leave where required, the employer may be liable for penalties with respect to each violation. In addition, an employer may be liable for penalties if the employer discharges, disciplines, or in any other way discriminates against an employee who takes paid leave in accordance with the Act.
The Department of Labor will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act. For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the Department receives a written commitment from the employer to comply with the Act in the future.