Editor's note: Information is up-to-date as of April 20, 2020
In response to the growing health and economic crises introduced by COVID-19, President Trump signed the Families First Coronavirus Response Act (FFCRA) into law on March 18, 2020. Designed to bring relief to American workers and employers impacted by the pandemic, the FFCRA includes a number of provisions that pertain directly to businesses, including but not limited to:
- The Emergency Paid Sick Leave Act (EPSLA)
- The Emergency Family and Medical Leave Expansion Act (EFMLEA)
- Payroll tax credits for paid leave under the FFCRA
Each of these provisions went into effect on April 1, 2020, and expire on Dec. 31, 2020. There are many Department of Labor (DOL) resources available to help employers understand the ins and outs of the provisions — of which we highly recommend reviewing their FFCRA poster and recently updated FAQs.
With that said, we’ve boiled down much of the information below, so you can better understand each of the paid leave provisions and their related tax credits.
Emergency Paid Sick Leave Act (EPSLA)
Under the EPSLA, private employers with fewer than 500 employees and public employers (e.g., federal/state governments, political subdivisions, schools) are required to provide paid sick leave to employees regardless of their length of employment or status (part-time or full-time). Employees are eligible for Emergency Paid Sick Leave (EPSL) if they are unable to work or telecommute because of the following reasons pertaining to themselves or someone they care for:
- They are under federal, state, or local quarantine or isolation orders related to COVID-19. This includes shelter-in-place and stay-at-home orders, but only if the employer still has work that could be performed had it not been for the order (see FAQ number 60 for details).
- They have been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- They are experiencing symptoms of COVID-19 and are seeking medical diagnosis.
- They are caring for an individual who is subject to government or doctor-ordered quarantine.
- Their child’s school or day care is closed or unavailable due to COVID-19.
- They are experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
Please note, if employees meet the criteria for EPSL, employers cannot require them to use other available paid leave before using EPSL. Also, employers may be exempt from offering these emergency benefits if their business has fewer than 50 employees, and the DOL determines that providing paid leave “would jeopardize the viability of the business.” The DOL states that it will issue exemption criteria in forthcoming regulations.
There are plenty of nuances surrounding the qualifying reasons mentioned above, for which employers should consult the aforementioned FAQs — or this National Law Review article, which includes additional color.
What are employees entitled to under the EPSLA?
While all employees are eligible for EPSL regardless of full- or part-time status, the amount of paid leave they’re entitled to varies depending on the reasons we discussed above:
- For reasons 1-4 and 6: A full-time employee is eligible for up to 80 hours of leave over a two-week period, and a part-time employee is eligible for the number of hours of leave that they work (on average) over a two-week period.
- For reason 5: Full-time and part-time employees are eligible for the same amount of leave as outlined in the above bullet. However, in addition to the two weeks of paid sick leave, employees are also eligible for another 10 weeks under the Family and Medical Leave Act (FMLA) that was recently expanded (see EFMLEA section below).
To calculate a part-time employee’s average hours, employers should take the employee’s average hours worked in the six months prior to the date of requested leave. If employees have less than six months of work history, employers can use a “reasonable expectation of what the employee would be working at the time of hiring.”
Depending on the qualifying reason, employees are eligible for varying levels of pay:
- For reasons 1-3: Employees are eligible for 100% of regular wages, up to a maximum of $511 per day or $5,110 total (over a two-week period).
- For reasons 4 and 6: Employees are eligible for paid time at two-thirds of regular wages with a max of $200 per day or $2,000 total (over a two-week period).
- For reason 5: As discussed in the above bullet, employees are eligible for two-thirds their regular pay, up to $200 per day and $2,000 total (over a two week period). However, in addition to the two weeks of paid sick leave, employees are eligible for additional pay under the newly expanded FMLA (see EFMLEA section below).
Emergency Family & Medical Leave Expansion Act (EFMLEA)
The EFMLEA amends the Family and Medical Leave Act (FMLA) to provide emergency paid and unpaid leave for employee absences related to the COVID-19 public health emergency.
As with the EPSLA, covered employers include private employers with fewer than 500 employees and public employers (e.g., federal/state governments, political subdivisions, schools). Again, some exemptions apply if providing expanded FMLA would jeopardize the viability of the business.
All current employees who have been on the payroll for at least 30 days and are actively scheduled for work are eligible for leave under this policy. Employees laid off or otherwise terminated on or after March 1, 2020, who are rehired on or before December 31, 2020, are eligible for leave upon reinstatement. However, they must have previously been on the payroll for 30 or more of the 60 calendar days prior to their layoff or termination.
What are employees entitled to under the EFMLEA?
Similar to traditional FMLA, employees are eligible for up to 12 weeks of job-protected leave for a qualifying need. Under the EFMLEA, a qualifying need is limited to circumstances where an employee is unable to work or telework due to a need to care for a child whose school or child care has been closed or is unavailable due to the COVID-19 public health emergency. Eligible employees are entitled to the following:
- An initial 10-day period (2 weeks) of unpaid time. While the first ten days are unpaid, employees may opt to use accrued vacation, personal or sick leave, or EPSL during this period. However, employers cannot require employees to use other available paid leave.
- A remaining 10-week period of pay at two-thirds of the employee’s regular rate of pay. This paid period is capped at $200 per day and $10,000 total.
As with EPSL, part-time employee amounts are based on the average number of hours the employee is scheduled. For employees with variable schedules, employers can determine that number by taking the average number of hours the employee was scheduled over the six months prior to the date of requested leave. If employees have less than six months of work history, employers can use a “reasonable expectation of what the employee would be working at the time of hiring.”
The leave time provided to employees under the EFMLEA is included in and not in addition to the total leave entitlement of 12 weeks of FMLA leave in a 12-month period. If an employee has already taken four weeks of FMLA leave, for example, that employee would only be eligible for another eight weeks of FMLA leave under this policy.
Payroll Tax Credits under the FFCRA
To help employers afford the new paid sick leave and expanded FMLA benefits, companies are able to seek reimbursement through tax credits. Under the FFCRA, non-governmental employers with less than 500 employees can claim refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. Governmental agencies are not eligible for tax credits (but are eligible for leave).
What is eligible for a payroll tax credit?
Under the FFCRA guidelines, employers are eligible for tax credits for the following expenses:
- Paid sick leave and family and medical leave payments up to the imposed limits per employee.
- Qualified health plan expenses allocable to the qualified leave wages.
- The amount of the employer’s portion of Medicare tax on leave payments. Employer leave payments are also exempt from Social Security tax. (This is the current interpretation, however, this is subject to change under the FFCRA guidelines.)
Employers can claim the tax credits for any FFCRA sick or family leave wages provided between April 1, 2020 and Dec. 31, 2020. However, if employers are seeking credits for both EPSL and expanded FMLA wages, they cannot count the same wages for both credits.
How can employers claim the refundable tax credits?
Employers can claim their total qualified leave wages, allocable qualified health plan expenses, and share of Medicare tax on leave payments each quarter on Form 941.
If their federal employment taxes don’t cover the leave wages, they can receive an advance of the credits by submitting Form 7200 via fax (yes, fax!), which allows them to receive the funds prior to filing their 941 at the end of the quarter. With that said, employers should consult their payroll provider to determine if there’s a better solution for their circumstances. For example, Payroll Data can carry employer credits forward and adjust future payrolls, which (depending on how often the employer runs payroll) can have a faster recovery time than Form 7200 and is less prone to error.
To claim the credits, employers should review the IRS FAQ page (FAQ 44-46) to determine what documentation and records they must keep. At a high-level, employers must have the following:
- Detailed documentation supporting an employee’s eligibility for FFCRA leave.
- Documentation to show how they determined the amount of paid sick leave and expanded family and medical leave the employee was eligible for, including records of work, telework, and paid sick leave and expanded family and medical leave.
- Documentation to show how they determined the amount of qualified health plan expenses that the employer allocated to wages.
- Copies of any completed IRS Forms 7200 that the employer submitted to the IRS. If you’re a Payroll Data client and you requested an advance via Form 7200, you must also send a copy of the form to email@example.com to ensure your 941 is accurate.
- Copies of any completed IRS Forms 941 that the employer submitted to the IRS. For employers that use accountants to meet their employment tax obligations, records of information provided to the accountant regarding the employer’s entitlement to the credit claimed on IRS Form 941 should be saved.
Employers are advised to maintain all of this documentation, regardless of whether or not leave was granted, for a minimum of four years.
Additional steps to take
As an employer, it’s your obligation to keep employees informed. In fact, certain employers are required to post the DOL’s notice of employee rights under the FFCRA in a conspicuous place on-premises or distribute it via email, a postal service, or an employee information website. For more information on paid leave under the FFCRA, don’t forget to monitor the DOL’s FAQ page for regular updates.