In a continued effort to help mitigate the financial devastation caused by the Coronavirus, President Donald Trump signed the Families First Coronavirus Response Act. This new law requires certain employers to provide emergency paid sick leave in certain circumstances, as well as provide additional time off to employees under the Family Medical Leave Act who need to take care of a family member effected by the virus.
To better understand these changes, it’s best to break down the new law into two separate provisions; the Emergency Paid Sick Leave and Family Medical Leave. However, both take effect on April 2, 2020 and will expire on December 31, 2020.
Emergency Paid Sick Leave (“EPSL”)
This is an unheard-of law that’s never been on the books before! Essentially, qualifying employees (6 reasons below) can receive paid leave for up to 2 weeks in advance (while not working) and the Federal Government will pay for it. Here are the specific provisions:
- Not all Companies will participate. Only employers with fewer than 500 employees, including public agencies are required to provide the EPSL benefit. The law also allows for subsequent Department of Labor regulations to exempt small businesses with fewer than 50 employees if applying these provisions would jeopardize the viability of the business.
- Employers don’t pay for it. First, keep in mind the EPSL doesn’t cost employers anything! Once benefits are paid, employers simply apply for a full 100% reimbursement and receive a dollar for dollar tax credit against any payroll taxes paid with their quarterly payroll reports. The IRS will issue the proper procedures and Forms for reimbursement on or before April 2, 2020.
- Employees can receive paid sick leave. If employees qualify under 1 of 6 reasons (see below), that can receive benefits in the following amounts:
- Two weeks (80 hours) of pay, immediately (not after they come back) paid at their regular rate of pay, for reasons 1-3 below (employee is sick with Covid-19). This is at a maximum of $511 a day, and $5,110 in total.
- Two weeks (80 hours) of pay, immediately (again now, not after they come back to work) paid at 2/3 their regular rate of pay, for reasons 4-6 below (caregiver reasons). This is at a maximum of $200 a day and $2,000 in total.
- Not all Employees are eligible. The sick leave provision applies to all employees, regardless of length of service, however, only to those employees with the inability to work or telework due to any of the following:
- 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 because of COVID-19.
- The employee is experiencing symptoms of (you guessed it) COVID-19 and is seeking a medical diagnosis.
- The employee is caring for an individual (NOT limited to a family member) subject to a quarantine or isolation order or advised to quarantine or isolation.
- The employee is caring for a son or daughter whose school or place of care is closed, or childcare provider is unavailable, due to COVID-19 precautions.
- The employee is experiencing any other substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor (a catch-all!).
- It’s supplemental to any other insurance or benefits. The sick leave provision does not require employees to use paid leave first under an existing policy before using this new emergency paid leave. It’s completely supplemental.
- The unused sick leave does not carry over to next year. If an employee doesn’t use this benefit for a virus-related purpose in 2020 (see the list above), the unused portion does not carry over to 2021. Moreover, the sick leave does not have to be paid upon termination before December 31st under federal law, however your state law might require it to be paid. So check that before you make a final decision to not pay the benefits if you terminate an employee.
Family Medical Leave Act (“FMLA”)
This new law simply ‘expands’ the current FMLA with some additional provisions that are in effect beginning April 2nd and expire December 31st, 2020. Essentially, it allows employees to take leave from their employment to care for a family member affected by the virus and in some situations also receive paid benefits while they are gone.
- Again, not all Companies will participate. Similar to the Paid Sick Leave provision, this law only applies to employers with fewer than 500 employees, including public agencies. However, employers of an employee who is a healthcare provider, or an emergency responder, can elect to exclude the employee from this FMLA provision. The law also allows for subsequent Department of Labor regulations to exempt small businesses with fewer than 50 employees if applying these provisions would jeopardize the viability of the business.
- Employees can stay home to take care of family. This is limited to an employee who cannot work or telework due to the need to care for the employee’s minor son or daughter if the minor child’s school or place of childcare has been closed, or the childcare provider is unavailable due to a “public health emergency” with respect to COVID-19 declared by a federal, state or local authority. Basically, it is “caregiver leave”.
- Must be an employee for at least 30 days. Under the FMLA provision, both full and part-time employees who have been on the employer’s payroll for 30 days are eligible.
- This special FMLA can also be paid! The first 10 days (two weeks) are unpaid, but an employee can substitute accrued paid leave, including the new emergency paid sick leave. The remaining leave (a maximum of 10 weeks, as the total available is still 12 weeks) is paid at 2/3 of the employee’s regular rate, for the number of hours the employee would be otherwise scheduled to work. This pay is capped at $200 a day and $10,000 total.
- Your Job is Protected. Under the FMLA provision the employee must be restored to the same or equivalent position. However, there is an exception for employers with fewer than 25 employees, if the employee’s position no longer exists due to operational changes related to the public health emergency, such as a reduction in force or restructuring because of a downturn in business. Essentially, an employer cannot retaliate against an employee for exercising his or her rights under these new laws. You will also have to post a Notice detailing these laws, and the Department of Labor is in the process of drafting that Notice.
If I’m an Employee – How do I get paid and take leave under FMLA or EPSL?
The Labor Department must issue guidelines by April 2, 2020 to assist employers in calculating how much paid leave their employees should get. After that, you should be able to simply notify your employer; take the leave and get paid immediately for the amount specified under the new law.
If I’m an Employer – How do I get reimbursed for payments under either Provision?
The government is promising that employers will be reimbursed for the full amount dispersed to employees under either of these provisions within three (3) months as a payroll tax credit. The Trump administration is saying they will also reimburse employers sooner that can’t afford to wait that long- it’s yet to see what that criteria will look like. However, we do know this:
- The reimbursement will also cover employer’s payment for any health insurance premiums paid on an employee’s behalf while they were on ‘leave’.
- On April 2nd the Treasury Department is supposed to issue reimbursement guidelines and procedures for employers.
- The benefit is to be fully refundable to the employer, which means that if the amount that employers pay is larger than what they owe in taxes, the government should send them a check for the remainder.
In summary, there are still a lot of unknowns on how these laws will be implemented entirely and the details, especially for that of self-employed and gig economy workers. Make sure to follow the news or updates from your tax professionals on what to expect and how to proceed in the coming weeks and months.
This post will be updated as more details about the tax relief guidelines are released.
* To sign up for Mark’s weekly Free E-Newsletter and receive his Free E-Book “The Top 10 Best Tax Saving Secrets Everyone Should Know” visit www.markjkohler.com.
Mark J. Kohler is a CPA, Attorney, co-host of the Radio Show “Refresh Your Wealth” and author of the new book “The and Legal Playbook- Game Changing Solutions For Your Small Business Questions: 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom- What Wall Street isn’t Telling You”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firmK&E CPAs, LLP.