We continue to monitor legislation and would like to share information which will help you address your immediate business planning needs and reduction in workforce concerns.
The Families First Coronavirus Response Act passed March 18, 2020 is expected to go into effect on April 2, 2020. The Act creates significant new financial and administrative obligations for employers. Due to the Act not requiring employers to provide paid time off to employees who were laid off prior to the act taking effect, employers are faced with the difficult and urgent decision regarding staffing. Regulations will be issued by the Department of Labor, but until that time employers should be prepared to comply with the law as is written.
The legislation requires two new types of paid employee leave, Sick Leave and FMLA.
Summary of the New Federal Sick Leave Requirements of the Act
The bill requires employers with up to 500 employees to provide paid sick leave and paid family leave to their employees. To cover the costs of the leave, the government will give employers a refundable payroll tax credit as well as a refundable income tax credit for self-employed individuals.
Leave Reasons:
- 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 a quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- The employee is caring for a son or daughter if the school or place of care for the child has been closed, or childcare provider is unavailable due to COVID-19 precautions
- The employee is experiencing any other substantially similar condition as specified by the Secretary of Health and Human Services
Duration:
- The duration of benefits for a full-time employee is 80 hours. For part-time employees it is the average number of hours worked over a regular 2 week period. Paid leave under this provision would not carry over.
Benefit Amount:
- For leave reasons #1-3: Paid at the employee’s regular hourly rate up to $511 per day for an employee’s own quarantine or isolation order, the employee’s self-quarantine under the advice of a health care provider, or the employee is symptomatic and seeking medical diagnosis.
- For leave reasons #4-6: Paid at 2/3 of the employee’s regular hourly rate up to $200 per day for an employee caring for an individual who is subject to a federal, state or local quarantine or isolation order; caring for a son or daughter of employee if school or place of care is closed or childcare provider is unavailable due to COVID-19 precautions; or employee is experiencing a similar condition specified by the Secretary of Health and Human Services.
- 100% of employer costs are offset for providing this mandated paid sick leave. The credits apply against the employer’s Social Security Taxes and are equal to 100% of the “qualifying” amount of sick and FMLA leave up to the maximum amounts.
Notice Requirement:
Employers will be required to post notice of the availability of paid sick leave in the workplace. The Department of Labor will provide guidance on the contents of the notice within seven days from enactment.
Eligibility Requirements for the New Federal Paid Sick Leave:
All employees of an employer are eligible for the paid sick leave.
Summary of the New FMLA Expansions
The 50-employee minimum applicable to current FMLA leave reasons does not apply to COVID-19 related leaves, although the Act gives the Department of Labor authority to limit the applicability of the Act to employers with fewer than 50 employees. Absent any regulations from the DOL, all employers with fewer than 500 employees must offer COVID-19 related FMLA leave to their workforce. The job protection requirements of the FMLA also apply to COVID-19 related leaves, but only to employers with 25 to 499 employees, if certain conditions are met.
New FMLA Leave Reason:
- Closed schools/childcare providers: Employees who are unable to work or tele-work due to the need for leave to care for a minor in the event of the closure of the child’s school or place of care due to COVID-19 precautions.
Duration:
- 10 weeks of family paid leave (12 weeks total)
- This 12 week period does not extend any time under the FMLA act, it simply adds another reason for leave and specifies payment.
Benefit Amount:
- The first 10 days (80 hours) are unpaid, but the employee can use the 10 days (80 hours) of the new federal paid sick leave during this time.
- The benefit must replace at least two-thirds of the employee’s wages up to a maximum of $200 per day (and $10,000 in aggregate) and reflect the number of hours an employee would otherwise be normally scheduled to work.
- The new Act allows employers with fewer than 500 employees to claim a tax credit of 100% of qualified FMLA wages paid to employees, which is capped at $200 per day and $10,000 per quarter per employee. The FMLA tax credit is designed to help employers recover up to $10,000 in wages for employees earning up to $52,000 per year. For employees earning above $52,000 per year, the tax credit will help employers recover a smaller portion of wages. This tax credit can be applied against the employer portion of Social Security taxes.
Documentation:
- Recommendation from a public health official or health care provider that employee has symptoms or should be quarantined
- Documentation or evidence of exposure
- Notice of school or childcare provider closure
Other Considerations:
- The Act allows an employer of an employee who is a health care provider or an emergency responder to elect out of providing paid family leave to these employees.
- Companies with fewer than 50 employees can request a hardship exemption from these provisions.
Eligibility Requirements for the New Federal Paid Family Leave:
- To be eligible for Paid Family Leave, the employee must have worked at least thirty calendar days for the employer before they were impacted by COVID-19.
What Does This Mean For You and Your Workforce?
The leave and tax credit provisions of the Act apply to all employers with fewer than 500 employees.
- Expand PTO/Sick Leave and FMLA programs to allow up to 12 weeks of COVID-19 related time off following the requirements of the Act.
- During any COVID-19 related absence, if the intent is to continue payment to employees for the duration of the absence, employers should continue paying employees through their payroll and consider updating benefit calculations to be consistent with the Act.
- Continue monitoring federal, state, and local legislation for additional changes that could impact your obligations as an employer to provide leave and benefits to your employees.
- Consult with your legal counsel to help create a legally compliant plan that works best for you and your employees.
Additional Points
- Employers who already provide paid leave to employees on the day before the law is enacted must provide this paid leave in addition to any paid leave already provided and may not change their paid leave policies on or after the date of enactment to avoid compliance.
- Employers cannot require employees to utilize other paid leave before using the paid leave provided by this bill.
- If you have Collective Bargaining Agreement or Employment Contracts, these must be reviewed for compliance.
Financial Calculations and Examples
Comparison of Unemployment Insurance benefits (UIA) to the New Families First Coronavirus Response Act benefits.
Unemployment Insurance Benefits:
Example of UIA weekly benefit for an employee working 8 hours a day at a rate of $12/hr or $480/wk ($5,760 highest quarter of base period), no dependents.
$5,760 x .041 (4.1% of earnings) = $236/wk (allowance of $6 per week per dependent – $30 max available)
$236 x 80 hours (2 weeks) = $472
12 weeks = $2,832
26 weeks = $6,136 (maximum benefit period)
New Federal Sick Leave Pay:
Example of pay for an employee working 8 hours a day at a rate of $12/hr
40 hours = $480 < $511 per day – for leave reasons 1-3, $5,110 aggregate
80 hours = $960 < $200 per day – for leave reasons 4-6, $2,000 aggregate
UIA for 2 wks $472 vs. $960 for 2 wks Paid Sick Leave
New COVID-19 Paid FMLA:
$12/hr for 10 weeks – $2,360 UIA
$12/hr for 10 weeks – $3,199.68 New FMLA **
**calculated at 2/3 of the employee’s regular rate of pay capped at $200 per day, $10,000 in total per employee ($7.99/hr x 40 = $319.99 x 10 weeks = $3,199.68)
Things to Consider:
How Does this Impact your Employee Benefit Programs
- What does your Summary Plan Description say regarding when coverage ends for layoff?
- When does coverage begin when recalled from layoff?
- How do your insurers treat these events and coverage eligibility?
- Medical
- Dental
- Vision
- Life/AD&D
- Short Term Disability
- Long Term Disability
- Any Voluntary Products
- Are you subject to COBRA?
- Are you a new FMLA employer under the Act?
- If you are already an FMLA employer how will you track these events?
- Do you have an outside FMLA administrator?
The State of Michigan has provided guidance to employers contemplating potential layoffs. The link is provided below.
Guidance for Employers Contemplating Potential Layoffs
Please Note: The information contained in this article is not legal or tax advice and should not be
relied upon or construed as legal or tax advice. This article is for general informational purposes only and
does not purport to be complete or cover every situation. Please consult your own legal and tax advisors
to determine how these laws affect you.