Families First Coronavirus Response Act 2020 And What It Means For Your Business

Update: The Senate passed this bill March 18th with some revisions and President Trump has signed it into law. We are awaiting details of how the programs will be administered; what the process will be for businesses under 50 employees to appeal paid leave on the basis of hardship; and how exactly the 100% tax cut applied against the employer portion of the Social Security taxes will work for those who do pay the leave.

President Donald Trump declared a national emergency March 13, and in response the House quickly pulled together a relief package called Families First Coronavirus Response Act. It is still under review by the Senate, has yet to be passed by both houses of Congress in its revised version, and must be signed by the President.

This is what we know so far. Among other assistance measures, the bill would provide:

• Reimbursement for COVID-19 diagnostic testing and services provided to Veterans and those without health insurance.
• Emergency transfers for Unemployment Compensation administration. The bill provides $1 billion for emergency grants to states for activities related to processing and paying unemployment insurance benefits.
• Health plan testing coverage. The bill requires private health plans to provide coverage for COVID-19 diagnostic testing, including the cost of a provider, urgent care center, and emergency room visits. Also, Medicare Part B and Advantage, TRICARE, Medicaid, and CHIP must cover expenses for provider visits during which a COVID-19 test is administered or ordered.
• Tax credits for paid sick and paid family and medical leave. The bill provides for a refundable tax credit equal to 100% of qualified paid sick or family leave wages paid by an employer for each calendar quarter. The tax credit is allowed against the employer portion of Social Security taxes. The credit applies to amounts paid to employees who are sick or quarantined; a lesser credit applies to amounts paid to employees caring for a family member or for a child whose school or place of care has been closed. Caps and limits apply. Tax credits for leave apply to self-employed individuals, too.

Important details have yet to be shared, but here is how the assistance will work: Certain employers will be required to provide paid sick leave for certain employees impacted by the coronavirus (COVID-19) and will receive a tax credit in return under an emergency bill. Note the three sections of importance:

A. The “FMLA Expansion Act” portion of the bill applies to employers with fewer than 500 employees and government employers. Under its provisions, employees who have been on the job for at least 30 days have the right take up to 12 weeks of job-protected leave under the FMLA for the following reasons:
1. To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus, if the employee is unable to perform the functions of the employee’s position while adhering to such requirement or recommendation;
2. To care for a family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus; and
3. To care for a child under 18 years of age if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to coronavirus.
• The right to take this leave expires on December 31, 2020.
• The Secretary of Labor may exempt small businesses with fewer than 50 employees when these requirements would jeopardize the viability of the business. The FMLA Expansion Act exempts employers who do not have 50 or more employees from private lawsuits.
• The first 14 days of leave is unpaid, but employees may elect to substitute paid leave for this unpaid leave. Unlike other FMLA leave, employers may not require substitution. Thereafter, leave is paid at 2/3 of the employee’s regular rate of pay for the number of hours that the employee would otherwise have been normally scheduled to work. Employers with fewer than 25 employees are relieved of the obligation to restore the employee to the same or equivalent position at the end of leave if the employee’s position no longer exists due to economic or operating conditions caused by the coronavirus emergency and the employer makes reasonable efforts to restore the employee to an equivalent position.
B. The Emergency Paid Sick Leave Act portion of the bill requires employers with fewer than 500 employees and government employers to provide full-time employees 80 hours of paid sick time paid at the employee’s regular rate, for the following reasons: to quarantine; to seek a diagnosis or preventive care for coronavirus; or to comply with a recommendation or order to quarantine due to exposure to or symptoms of coronavirus. The requirements to provide this paid leave expire on December 31, 2020.

• The bill requires wages to be paid at 2/3 the employee’s regular rate for leave associated with care for a family member subject to self-isolation or quarantine or who needs to seek a diagnosis or preventive care for coronavirus or to care for a child whose school has closed, or whose child care provider is unavailable, due to the coronavirus.
• Part-time employees are also entitled to paid sick time based on the number of hours that the employee would otherwise be normally scheduled to work in a two-week period.
• Employees are immediately eligible for emergency paid sick time. Paid sick time under the bill is not required to be paid at termination of employment.
• Importantly, employers must provide the paid sick time in addition to any other paid leave, and employers may not change their paid leave now to avoid paying leave in addition to the emergency paid sick time. Employers may not require employees to use other paid leave before the employee uses emergency paid sick time, but may require reasonable notice of leave after the first payment of paid sick time.
• Violations of emergency paid sick leave, including retaliation for taking leave or engaging in protected activity with respect to leave, are equivalent to a violation under the Fair Labor Standards Act, and are subject to the same remedies: damages, an equal amount as liquidated damages, attorneys’ fees, costs, and injunctive relief or reinstatement
• Finally, the bill ensures employees who work under a multi-employer collective bargaining agreement and whose employers pay into a multi-employer plan providing the above benefits are provided with both types of leave.
• Unlike the Emergency FMLA Expansion Act, the Emergency Paid Sick Leave Act does not have a hardship exemption available for small employers. The expanded availability of FMLA leave under this act continues through December 31, 2020.

C. The Tax Credits for Paid Sick and Paid Family and Medical Leave portion of the bill is meant to ease the financial burden on employers. It provides a quarterly credit against the employer portion of Social Security taxes for amounts paid under the FMLA Expansion Act and the Emergency Paid Sick Leave Act.
• The credit for sick leave wages for each employees who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation with respect to coronavirus is capped at $511 per day. For sick leave wages to each employee caring for a family member or for a child whose school or place of care has been closed, the credit is capped at $200 per day. The credit for family leave wages is capped at $200 per day for each individual and $10,000 per individual for all quarters.
• The credit is limited to the Social Security tax imposed for such calendar quarter on wages paid with respect to all employees. However, any excess credit shall be treated as an overpayment that is refunded to the employer. The aggregate number of days taken into account per employee may not exceed the excess of 10 over the aggregate number of days taken into account for all preceding calendar quarters.

What’s NOT included? There will be no payroll tax cuts. President Trump called for payroll tax relief to last through the election, but neither party in Congress seems inclined to agree.

On a side note, something which may ease an employer’s guilt and burden at having to let good help go, the states have significant flexibility to amend their laws to provide unemployment insurance benefits for employees who lose work because of effects of COVID-19, according to guidance issued by the U.S. Department of Labor (DOL) on March 12. For instance, according to the guidance, states can pay benefits when:

• An employer temporarily closes due to COVID-19 and employees can't work.
• An employee is quarantined but expects to work when the quarantine is over.
• An employee leaves his or her job due to a risk of exposure or infection or to care for a family member.

Federal law doesn't require employees to quit their jobs in order to receive unemployment insurance benefits related to COVID-19. Though, the department noted, employees who are receiving paid sick leave or paid family leave are generally not considered unemployed because they are still receiving pay. So they would likely be ineligible for unemployment insurance benefits while receiving such pay.

Contact Us: There is much uncertainty revolving around this bill and others regarding payroll tax relief, tax extensions, state tax deadlines, short term, no-interest business loans from states, additional state unemployment monies available, worker’s comp eligibility, etc. Please contact your Fuoco Group and TFG professionals for clarification. We will keep you up to date on these moving targets and advise you while things are in a state of flux.