On March 18, 2020 President Trump signed into law The Families First Coronavirus Response Act, the initial coronavirus relief bill.
It requires small employers to provide limited paid-leave benefits to employees who are affected by the coronavirus emergency.
Today, the U.S. Treasury Department, IRS, and the U.S. Department of Labor announced that these employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, for the cost of providing Coronavirus-related leave to their employees.
“The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.”
Impact on Small Businesses
Treasury, IRS, and Labor announcement
Coronavirus Tax Relief – IRS
We wanted to provide you with some “straight from the source” references encourage everyone to read the linked announcements carefully but extracted some key points for you below:
Emergency Paid Sick Leave:
- Employers are required to offer paid leave* for employees that are sick, getting tested, or caring for family members
- There’s a refundable payroll tax credit for employers for 100% of these wages
- The beginning date for leave payments that qualify for the credit is TBD, but will be sometime between 3/18 to early April
- The Act will go into effect in early April and I’m sure there will be a lot more info about it in the next week
- To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
- The Department of Labor will release “simple and clear” criteria for businesses with fewer than 50 employees to apply for exemptions from the leave provisions related to school and childcare closures; and
- There will be a 30-day non-enforcement period for businesses making a reasonable effort.
*Paid Leave Details:
- Note: Employers are prohibited from requiring an employee to use other paid leave provided by the employer prior to using paid sick leave required by the Emergency Paid Sick Leave Act. Employers are also prohibited from requiring workers to find a replacement to cover their hours during their time off.
- During sick leave, the employer must generally pay employees their regular rate of pay (as defined by the Fair Labor Standards Act) or the applicable minimum wage, whichever is higher, up to a maximum of $511 per day (and a total of $5,110). However, leave to care for an individual on quarantine/isolation/self-quarantine or to care for a child whose school or daycare is closed or whose childcare provider is unavailable may be compensated at 2/3 of the employee’s regular rate of pay, up to a maximum of $200 per day (and a total of $2,000).
- For employees with variable work schedules, the determination of hours to be paid is based on the average hours the employee was scheduled per day over the six-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type. If the employee does not have six-months of work history with the employer, hours are based on the employee’s reasonable expectation at the time of hire of the average hours the employee would normally be scheduled to work.
- Employers are prohibited from taking adverse action against an employee for exercising their rights under the law.
Emergency Family and Medical Leave Expansion:
The Emergency Family and Medical Leave Expansion Act amends the Family and Medical Leave Act (FMLA) to temporarily require employers with fewer than 500 employees to provide public health emergency leave (PHEL).
To be eligible for PHEL, an employee must:
- Work for an employer with fewer than 500 employees.
- Have worked for the employer for at least 30 calendar days prior to the leave.
Use of PHEL:
Eligible employees may use up to 12 weeks of job-protected leave to care for their child under 18 years of age if their school or place of care has been closed, or their childcare provider is unavailable, due to a public health emergency.
Pay During PHEL:
The first 10 days of PHEL may be unpaid, but the employee may elect to substitute any accrued paid leave, including emergency paid sick leave, during this period. Employees are entitled to paid PHEL after the first 10 days, at a rate of no less than two-thirds their regular rate of pay, up to a maximum of $200 per day.
An employer of a healthcare provider or an emergency responder may elect to exclude the employee from the PHEL requirement.
The U.S. Department of Labor also has the authority to issue regulations exempting employers with fewer than 50 employees where the requirements would jeopardize the viability of the business.
At the end of PHEL, the employer must generally return the employee to the same or equivalent position. However, employers with fewer than 25 employees are exempt from this requirement if:
- The employee’s position doesn’t exist after PHEL due to economic conditions or other changes in operating conditions that affect employment and were caused by a public health emergency during the period of leave;
- The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held before the leave; and
- The employer makes reasonable efforts to contact the employee if an equivalent position becomes available within the next year.
We absolutely recognize that this will continue to be an evolving topic and questions will be endless. We will continue updates on the coronavirus impact to small businesses as best we can and we encourage any and all questions.