I. Federal Legislative Actions
On Friday, March 13, 2020, the House announced that they reached a deal with President Trump’s administration in response to the COVID-19 outbreak.
At 1:00am early Saturday morning, the House passed HR 6201 with a 363 – 40 vote. The emergency bill is cited as “Families First Coronavirus Response Act.”
On March 18, 2020, the Senate passed the bill with a 90 – 8 vote. On March 18, 2020, the President signed the bill into law.
The law provides temporary paid sick and family medical leave, increases funding for health, food security and unemployment insurance programs, and provides free coronavirus testing.
Below is an outline of the highlights of the law.
II. Emergency Family Medical Leave Expansion Act
Division C | p. 12
Begins on the date the Act takes effect, and ends December 31, 2020.
Eligible employees are employees who have been employed at least 30 calendar days by the employer with respect to whom leave is requested.
The Act creates a threshold for qualifying employers. Accordingly, Employers who employ 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year are subject to the Emergency Medical Leave Expansion Act.
Employers with fewer than 50 employees
The Secretary of Labor has the authority to issue regulations for good cause to exempt small businesses with fewer than 50 employees from the paid leave requirement.
Qualifying Need Related to a Public Health Emergency
The Act protects employees with a “qualifying need related to a public health emergency.” The term “qualifying need related to a public health emergency,” with respect to leave, means that the employee is unable to work due to a need for leave to care for the son or daughter under 18 years old of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.
Unpaid Leave – Initial 10 Days
The first 10 days that an employee takes leave may be unpaid. The employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave under this section; however, the employer may not require the election to substitute.
Paid Leave – After Initial 10 Days
The employer shall provide paid leave for each day of leave that the employee takes after taking the initial 10 days’ leave. The pay shall be calculated based on:
- An amount that is not less than 2/3 of an employee’s regular rate of pay; and
- The number of hours that the employee would otherwise be normally scheduled to work.
In no event shall paid leave exceed $200 per day, or $10,000 in the aggregate.
Employees with Varying Schedules
For those employees whose schedules vary week-to-week, the employer should calculate hours by determining the average number of hours that employee is scheduled for per day over the 6-month period ending on the date that the employee’s leave begins. If the employee has not worked for 6-months prior, the employer should consider the reasonable expectation of hours that the employee would normally be scheduled.
Where practicable, the employee shall give notice to the employer where the necessity for leave is foreseeable.
III. Emergency Unemployment Insurance Stabilization and Access Act of 2020
Division D | p. 15
The State shall notify an employee at the time of their separation from employment of the availability of unemployment compensation.
Notice of Received/Processed Application
The State must then notify the applicant when the application is received and is being processed.
Non-Charge for COVID-19
The State may not charge employers directly impacted by COVID-19 due to an illness in the workplace, or direction from a public health official to isolate or quarantine workers. (p. 41).
IV. Emergency Paid Sick Leave Act
Division E | p. 18
The Emergency Paid Sick Leave Act applies to private employers that employ fewer than 500 employees, and public agencies that employ one or more employees.
Employers Must Provide
An employer shall provide to each employee employed by the employer paid sick time for any of the following uses:
- 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 professional to self-quarantine due to concerns related to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
- The employee is caring for an individual who is subject to an order described in (i), or has been advised as described in (ii).
- The employee is caring for the son or daughter of such employee if the school or place of care for the son or daughter has been closed or the childcare provider 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.
Amount of Paid Time
For full time employees, the employee is entitled to 80 hours of paid sick time.
For part time employees, the employee is entitled to the number of hours equal to the number of hours that employee works on average, over a 2-week period.
Paid sick time under this Act shall not carry over from one year to the next.
Paid sick leave under this Act terminates beginning with the employee’s next scheduled work shift immediately following termination of the need for paid sick time, as described in (b) above.
Paid sick time under this Act shall be available for immediate use by the employee for purposes described in section (b) above, to cover the hours during which the employee is using paid sick time.
Employer with Existing Paid Sick Time Policy
The employee may first use the paid sick time under the Act. The employer may not require the employee to use the paid leave provided by the employer before using paid sick leave under the Act.
The employer may not require the employee seek a replacement employee to cover in their absence.
The employer shall post, and keep posted, in a conspicuous place on the premises, the requirements described in the Act.
Seven days after the enactment of this Act, the Secretary of Labor shall make publicly available a model of a notice that meets the requirements of the Act.
Discrimination, Discipline, Discharge
It is unlawful for an employer to discriminate against, discharge, or discipline an employee who takes leave in accordance with the Act and has filed any complaint or proceeding under this Act.
An employer who fails to provide paid sick leave will be considered to have failed to pay minimum wages in violation of section 6 of the Fair Labor Standards Act of 1938 (29 USC 206), and shall be subject to the penalties described in sections 16 and 17 therefrom.
This Act and the requirements of this Act shall take effect not later than 15 days after the date of enactment for the Emergency Paid Sick Leave Act. The Act shall expire on December 31, 2020.
Payroll Tax Credits for Paid Sick and Paid Family and Medical Leave
Division G | p. 33
The Act makes several changes to Federal Insurance Contributions Act (FICA), which is at IRC 3111. The FICA taxes are Social Security, Medicare, and Medicaid. We anticipate larger changes to the income and excise tax rules as part of the $1 trillion economic stimulus package currently working its way through Congress.
Paid Sick Leave.
- 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified sick leave wages paid by the employer with respect to such calendar quarter.
- $200 Daily Limit per Employee. The amount of qualified sick leave wages taken into account with respect to any individual shall not exceed $200 for any day for which the individual is paid qualified sick leave wages.
- Overall Limit on Number of Days Taken into Account. The aggregate number of days taken into account under this section for any calendar quarter shall not exceed the excess of:
- 10, over
- The aggregate number of days so taken into account for all preceding calendar quarters.
- Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.
- Eligibility. Must be someone who regularly carries on a trade or business under Section 1402 of the IRC, and would be entitled to paid leave during the taxable year under the Emergency Paid Sick Leave Act (see section (2) of Division E highlights above).
- Coverage. There shall be allowed as a credit against the tax imposed by subtitle A of the Internal Revenue Code of 1986 for any taxable year an amount equal to 100% of the qualified sick leave equivalent amount with respect to the individual.
- (There are more details in the self-employment provisions that I can dig into should our clients prefer. I am not sure is this section is particularly relevant to our clients.)
Paid Family Leave.
- 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified family leave wages paid by the employer with respect to such calendar quarter.
- Wages Limit. The amount of qualified family leave wages taken into account with respect to any individual shall not exceed:
- $200 for any day for which the individual is paid qualified family leave wages; and
- In the aggregate with respect to all calendar quarters, $10,000.
Credit Limit. The credit allowed under this subsection with respect to any calendar quarter, shall not exceed the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter on the wages paid with respect to the employment of all employees of the employer.
Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.
Tax on Employers.
- Not Wages. Any wages required to be paid by reason of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act shall not be considered wages for the purposes of Section 3111(a) of the Internal Revenue Code of 1986.
A more sweeping tax bill is still pending at this time related to income tax and insurance tax implications. For more specifics on the current law, as well as pending legislation, we encourage you to consult one of the experienced tax lawyers at Samuels Yoelin Kantor LLP.