President Trump signed the Families First Coronavirus Response Act (FFCRA H.R. 6201) shortly after it passed through the Senate on March 18, 2020. The legislation applies to companies with 500 employees or less employees. The employer cost of these expanded programs will be absorbed by available tax credits included in the bill.
Here is a recap of what is included in FFCRA:
This bill responds to the coronavirus outbreak by providing paid sick leave, free coronavirus testing, additional food assistance and unemployment benefits, and it requires employers to provide additional protections for health care workers. The bill also provides FY2020 appropriations to the Department of Health and Human Services for nutrition programs that assist the elderly.
The supplemental appropriations provided by the bill are designated as emergency spending, which is exempt from discretionary spending limits. The bill modifies USDA food assistance and nutrition programs to:
- allow certain waivers to requirements for the school meal programs,
- suspend the work requirements for the Supplemental Nutrition Assistance Program (SNAP, formerly known as the food stamp program), and
- allow states to request waivers to provide certain emergency SNAP benefits.
In addition, the bill requires the Occupational Safety and Health Administration (OSHA) to issue an emergency temporary standard that requires certain employers to develop and implement a comprehensive infectious disease exposure control plan to protect health care workers.
The bill also includes provisions that:
- establish a federal emergency paid leave benefits program to provide payments to employees taking unpaid leave due to the coronavirus outbreak,
- expand unemployment benefits and provide grants to states for processing and paying claims,
- require employers to provide paid sick leave to employees,
- establish requirements for providing coronavirus diagnostic testing at no cost to consumers, treat personal respiratory protective devices as covered countermeasures that are eligible for certain liability protections, and temporarily increase the Medicaid federal medical assistance percentage (FMAP).
Available Tax Deductions and Credits
FFCRA currently includes tax deductions and credits that are designed to fully compensate the employer for any funds expended pursuant to the bill. Steven Mnuchin, treasury secretary, claimed in a press conference on March 14, that 100% of the cost of the paid leave will be paid by the federal government via tax credits.
Employers would receive a quarterly credit against the tax imposed by section 3111(a) of the Internal Revenue Code of 1986 in the amount equal to 100% of the qualified paid sick leave wages paid to employees or qualified family leave wages.
The Treasury Department will be issuing guidance allowing companies with cash flow issues to get the money in advance from the IRS.
Family and Paid Leave
FFCRA provides for two types of paid leave for employees of all business with 500 or fewer employees.
- •12 Weeks (10 Paid) of Public Health Emergency Leave. The first two weeks are not paid. The next 10 weeks would be paid by the employer at two-third of the employee’s “regular pay rate.” based on the number of hours the employee would otherwise be normally work. This would apply to employees that need to be absent because either they or a family member that they must care for has COVID-19.
- 80 Hours of Emergency Paid Sick Leave. Employers would have to provide a bank of 80 hours of paid leave to full-time employees to use as a result of absences related to COVID-19. Part-time employees would receive an amount prorated to their regular work schedule.
FMLA Benefit Compensation Caps
Employees can use paid time off during the initial two weeks. The Act imposes a cap on how much pay employees can receive if they take FMLA leave to care for a child as a result of the COVID-19 pandemic. The pay is limited to $200 per day and $10,000 in the aggregate.
Emergency Paid Sick Leave Benefit Compensation Caps
The Act caps the compensation employees can receive while out on paid sick leave to:
- $511 per day and $5,110 in the total when an employee is subject to quarantine, has been advised to self-quarantine, or is experiencing coronavirus symptoms and is seeking medical diagnosis or
- $200 per day and $2,000 in the total if the employee is caring for someone who is subject to quarantine or has been advised to self-quarantine, caring for a child whose school or child care is closed or unavailable due to coronavirus, or experiencing a substantially similar condition.
The FMLA definition of an eligible employee includes a one-year and 1,250-hour service requirement. FFCRA broadens eligibility for Public Health Emergency Leave to any employee who has been employed for at least 30 calendar days.
School Closing and Child Care
FFCRA would allow employees to take Emergency Paid Sick Leave and/or Public Health Emergency Leave if their child’s school is closed. These benefits would generally apply to employees who need to care for a child under 18 years of age if their school or place of care has been closed, or the childcare provider is not available because of COVID-19.
In its current form, the paid leave provisions of the FFCRA are temporary. They would go into effect 15 days after the President signs the bill into law, and they would be available until December 31, 2020.
Employees who are laid off before the FFCRA is passed would not be entitled to Paid Sick Leave or Public Health Emergency Leave under the bill. Even if the law is passed, the paid leave provisions would not kick in for 15 days.
FMLA makes clear that an employee on leave is entitled to no greater protection from a layoff as any other employee [see 29 C.F.R § 825.216(a)(1)]. An employee whose position is eliminated while on leave would therefore not be entitled to continue the leave or be reinstated to their position.
It is not clear if the current FMLA standard regarding layoffs/position eliminations would also apply to employees taking Public Health Emergency Leave. Additional guidance is needed from the Department of Labor regarding this issue if the FFCRA passes in its current form.
This legislation could substantially impact your business (Division D—Emergency Paid Leave Act of 2020). It is important you understand the details of this FFCRA and how it could affect your business.
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).