Emergency Leave and Paid Sick Leave Requirements for COVID-19
President Trump has signed into law sweeping legislation in response to COVID-19: the Families First Coronavirus Response Act, which takes actions and provides supplemental appropriations to support Americans during the COVID-19 outbreak. Two of the changes under the new law affecting employers are an expansion of the Family and Medical Leave Act of 1993 (FMLA) and new employer emergency paid sick leave requirements, each to be in effect for the period commencing 15 days following enactment (April 2, 2020) through December 31, 2020.
Emergency family and medical leave
- Applies to private-sector employers with fewer than 500 employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year, and to certain public sector employees.
- Covered employers are required to provide up to 12 weeks of emergency leave for employees who have been employed by the employer for 30 calendar days and who, because of a public health emergency, are unable to work (or telework) because they need to care for a child under age 18 whose elementary or secondary school or place of care is closed, or because the child’s care provider (defined as “a provider who receives compensation for providing child care services on a regular basis”) has become unavailable.
- The emergency leave can be unpaid for the first 10 days. Employees may use accrued vacation, personal leave, or sick leave for this period, but cannot be required to do so by their employer.
- After the initial 10 days of emergency leave, the employee must be paid for the remainder of the emergency leave period, generally at the rate of two-thirds of the employee’s regular rate of pay, and for the number of hours that the employee would have otherwise been scheduled to work. If the employer is unable to determine with certainty the number of hours the employee would have worked, the average number for the six-month period ending on the date the emergency leave begins is to be used. If the employee did not work for that six-month period, then the employer should use the number of normally scheduled work hours per day reasonably expected by the employee as of the employee’s hire date.
- No more than $200 per day and $10,000 in total must be paid to an employee for an emergency leave.
- Upon completion of the emergency leave, the employer must restore the employee’s prior position (or an equivalent position). An exception from this requirement is available for employers with fewer than 25 employees if:
o At the end of the emergency leave, the employee’s position no longer exists due to economic conditions or other operational changes to the employer’s business caused by the public health emergency;
o The employer makes reasonable effort to restore the employee to an equivalent position with equivalent benefits, pay, and other terms of employment; and
o If those reasonable efforts fail, the employer makes reasonable efforts to contact the employee if such a position becomes available during the one-year period beginning on the earlier of the date on which the need for the emergency leave concludes or the date that is 12 weeks after the date on which the employee’s emergency leave commences.
- An employer of a health care provider or an emergency responder can elect to exclude that employee from the emergency leave provisions.
- The Secretary of Labor is authorized to issue regulations permitting employers to not provide the emergency leave to health care providers or emergency responders.
- The Secretary of Labor can also exempt an employer with fewer than 50 employees from the emergency leave requirement if providing the leave “would jeopardize the viability of the business as a going concern.”
Emergency paid sick leave
- Applies to private-sector employees with fewer than 500 employees and to certain public sector employees.
- Immediate eligibility (the 30-calendar-day service requirement applicable to the emergency leave rules does not apply to the emergency sick leave provisions).
- Covered employers are required to provide emergency paid sick leave to an employee who is unable to work because the employee:
o Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
o Has been advised by a health care provider to self-quarantine because of COVID-19;
o Is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
o Is caring for an individual who is subject to a quarantine or isolation order or who has been advised by a health care provider to self-quarantine because of COVID-19;
o Is caring for a son or daughter younger than age 18 whose school or place of care is closed, or whose child care provider is unavailable, due to COVID-19 precautions; or
o Is experiencing any other substantially similar condition as specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and Treasury.
- An employer of a health care provider or an emergency responder can elect to exclude that employee from the emergency paid sick leave provisions.
- The Secretary of Labor has been authorized to exempt an employer with less than 50 employees from the emergency paid sick leave requirement where paying the sick pay would jeopardize the viability of its business.
- An employer cannot require an employee to first use other paid leave provided by the employer as a condition for the employee to receive this emergency paid sick leave.
- Full-time employees can receive 80 hours of emergency sick pay, and part-time employees can receive emergency sick pay for the average number of hours the employee works over a two-week period. For a part-time employee whose schedule varies, where the employer is unable to determine with certainty the number of hours the employee would have worked, the employer should use the average number for the six-month period ending on the date the leave begins. If the employee did not work for that six-month period, the employer should use the number of normally scheduled work hours per day reasonably expected by the employee as of the employee’s hire date.
- The amount of the emergency sick pay is limited as following:
o $511 per day/$5,110 in the aggregate for an employee’s own illness or quarantine.
o $200 per day/$2,000 in the aggregate for an employee’s care for others/school closures.
Tax credit for employers
An employer that provides emergency paid leave and/or emergency sick pay will be entitled to a credit on a quarterly basis for such amounts against the employer portion of the Social Security tax (6.2%) due from the employer for all its employees’ wages for that quarter. If the amount of the credit for a quarter exceeds the employer’s Social Security tax liability for that quarter, the remaining credit amount would be refunded as if the employer had made a Social Security tax overpayment for that quarter. The credit also applies to self-employed individuals with certain modifications.
In addition, emergency paid leave and emergency sick pay will not constitute wages for purposes of the employer portion of the Social Security tax, and the employer portion of the Medicare tax (1.45%) incurred by the employer on these payments will increase the employer’s quarterly credit amounts.
What does CohnReznick think?
There are a multitude of issues and questions that will require regulatory guidance. For example, there are specific rules that will apply to the required aggregation of certain commonly owned or controlled employers for purposes of the various provisions based on the number of an employer’s employees. An issue of great importance to employers of fewer than 50 employees will be the specific requirements for exemption from the emergency leave and paid sick leave requirements where providing the leave would jeopardize the viability of the business as a going concern. We will continue to monitor regulatory guidance in this area.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
On-Demand Webinar: Mitigating Coronavirus Disruption
Coronavirus Resource Center
InsightPerspective: New IRS ‘Marijuana Industry’ page offers useful resources, but few new insightsMichael HarlowWhile it is good to see the IRS acknowledging the marijuana industry and aggregating useful links, the page overall offers little new information. Read more.
InsightFAQ: Employer leave-based donation programs for COVID-19 relief, and their tax implicationsLori Rothe YokoboskyRead rules and tax implications for programs in which employees forego leave in exchange for employer payments to charitable organizations aiding COVID-19 victims.
InsightTax reporting for nonemployee compensation: Be aware of new form, deadline for 2020Dana FriedThe new form 1099-NEC has a 2020 deadline different from the one previously used for Form 1099-MISC, and there will generally be no automatic extension available.
InsightU.S. Department of Labor revises rules and requirements for FFCRA emergency leaveDana FriedChanges include an adjusted “health care provider” definition and less timely documentation requirements for workers seeking leave for COVID-19-related reasons.