What Small Business Owners Should Know About Paid Sick Leave and Family Medical Leave Related to COVID-19
The Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, requires that certain employers provide employees with paid sick leave or expanded family and medical level for reasons related to the COVID-19 pandemic. These provisions will be effective from April 1, 2020 to December 31, 2020.
While it is still possible that this act may be amended, there are currently three sections to be considered: The Emergency Family and Medical Leave Expansion Act, the Emergency Paid Sick Leave Act, and Tax Credits for Paid Sick and Paid Family and Medical Leave.
Covered Employers (must comply) Under the Families First Coronavirus Response Act
The FFCRA applies to certain public employers, and private employers with fewer than 500 employees. Small businesses with fewer than 50 employees may qualify for exemption if the leave requirements would jeopardize the viability of the business as a going concern. Employers of employees who are health care providers or emergency responders may elect to exclude those employees from the emergency sick leave provisions.
Employers’ Obligations Under the Emergency Paid Sick Leave Act
Under this Act, employers may not require employees to use other types of paid leave (such as PTO) before the employee uses this paid sick leave. Also, an employer may not require the employee to find a replacement worker when the employee takes such leave. For part-time employees, employers must make Paid Sick Leave available in an amount which is the equivalent of the part-time employee’s average number of hours over two weeks.
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay because the employee cannot work for reasons of being quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
- Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay if the employee is unable to work because they need to care for an individual under quarantine, or care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the child care provider of the child is unavailable, due to coronavirus precautions; or an employee who is experiencing any other substantially similar condition specified by HHS in consultation with the Treasury and Labor Departments.
Employers’ Obligations Under the Family and Medical Leave
The FFCRA amends the Family Medical Leave Act to include protections related to an employee’s inability to work as a result of the COVID-19. In contrast to the existing forms of FMLA leave which require an employee to have been employed for 12 months, this provision is available to all employees who have been employed for at least 30 calendar days.
- Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay because an employee is unable to work due because they have to care for a minor child whose school or childcare provider is closed or if the care provider is unavailable for reasons related to COVID-19.
Employer Tax Credit Under the Families First Coronavirus Response Act
The FFCRA provides businesses with tax credits to cover certain costs of providing employees with required paid sick leave and expanded family and medical leave for reasons related to COVID-19, from April 1, 2020, through December 31, 2020.
- These tax credits covers 100 percent of up to ten days of the qualified sick leave wages and up to ten weeks of the qualified family leave wages (and any qualified health plan expenses allocable to those wages) that an Eligible Employer paid during a calendar quarter, plus the amount of the Eligible Employer’s share of Medicare taxes imposed on those wages.
- There is no credit for the employer portion of OASDI tax, also known as social security tax, that Eligible Employers are required to pay on the qualified leave wages because the qualified leave wages are not subject to this tax.
- Eligible Employers will report their total qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) for each quarter on their federal employment tax return, usually Form 941, Employer's Quarterly Federal Tax Return.
Now that the bill has been signed into law, employers should amend their policies and notify employees to ensure that employee leaves are administered correctly. For further guidance as to the specifics of how these provisions will be implemented, contact your accountant or tax professional.