EMERGENCY PAID SICK LEAVE ACT & EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT
The Coronavirus Aid, Relief and Economic Security (CARES) Act was just signed into law on March 27, 2020. It is a gigantic economic stimulus package with many provisions that will affect your business financially. The following are for businesses with employees and are affected by the Coronavirus Pandemic:
There are several payroll credits available as well as sick leave benefit changes effective April 1, 2020.
The Families First Coronavirus Response Act (FFCRA) was signed into law by the president on March 18, 2020. This Act became effective on April 1, 2020 and applies to sick leave taken between April 1, 2020 and December 31, 2020. It includes The Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA).
The original Family Medical Leave Act only applied to employers with 500 or more employees. This current act brings in all employers regardless of size and provides paid sick leave to employees through 12/31/2020.
The first Act – The Emergency Paid Sick Leave Act provides (this Act covers the first two weeks of sick leave):
- This Act covers the first two-week period the employee is out for the following three conditions:
- The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.
- In this instance, the employer is required to pay 100% of the employee’s regular pay rate (up to $511 per day) for the first two-week period (80 hours maximum).
- If one of the conditions in the following three descriptions applies, the employer must pay its employee two-thirds of his or her regular pay rate up to $200 per day ($2,000 in total) in sick leave for 80 hours over a two-week period.
- The employee is caring for an individual who is subject to an order as described in one of the previous conditions or has been advised in (b) above.
- The employee is caring for his or her child if the school or place of care of the child has been closed or the childcare provider of such child is unavailable due to COVID-19 precautions.
- The employee is experiencing any other substantially similar condition specified by the secretary of health and human services in consultation with the secretary of the treasury and the secretary of labor.
Under this Act, the employer is able to take a refundable tax credit against the employer’s portion of Social Security taxes equal to 100% of the qualified sick leave the employer paid for each calendar quarter plus a pro-rata share of the employer’s qualified health plan expenses. The employer’s sick leave payments and the employer credit resulting therefrom offset one another dollar for dollar.
The second Act – the Emergency Family and Medical Leave Expansion Act (EFMLEA) provides: (this act covers the next 12 weeks of leave (after the above) for qualifying need related to COVID-19 and requires you return the employee to work at the end of the leave.
- Following the first 10-day period (the period covered under the prior Act above), the employer must provide paid leave to an employee for each additional day of leave.
- The rate of pay for the next 12 weeks is calculated based on the rate of not less than 2/3 of the employee’s regular rate of pay the number of hours the employee would otherwise normally be scheduled to work. This benefit is capped at $200 per day or $10,000 in the aggregate.
Under this Act, the employer may claim a 100% credit against the employer’s share of payroll tax for each employee, limited to 2/3 of regular pay rate up to $200 per day, plus a pro rata share of the employer’s qualified health plan expenses. The family leave payments and the employer credit resulting therefrom offset one another dollar for dollar.
In the event you lay-off the employee, you are not liable for these benefits and the corresponding payroll tax credits. The employee is then entitled to claim the unemployment benefits provided by the State of Delaware. As an employer, normally when an employee claims unemployment, the payroll tax rate for unemployment tax is increased as a result. We have not heard any different as a result of this pandemic. However, there is a re-hire credit available if you re-hire the employee at a point in the future.
The federal payroll credits are obtained by completing IRS Form 7200 along with your normal quarterly 941 payroll tax forms. These credits will be available for the 2nd, 3rd and 4th quarter of 2020. The Form 7200 is only available in draft form at this point but is available online at www.irs.gov.