NOTE TO U.S. PARTNERS: The COVID-19 pandemic is rapidly evolving and may change on a daily basis. The information summarized herein is for the general education and knowledge of our partners. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal or tax issue. The laws of each partner jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel in your area.
On March 18, 2020, the Families First Coronavirus Response Act was enacted into law and the provisions below go into effect April 2, 2020. Certain key provisions of interest to our partners are highlighted below.
Emergency Family and Medical Leave Expansion Act (FMLA+)
Applicability: Employers with under 500 employees.
Employees: Employed at least 30 days; provides up to 12 weeks of leave "because of a qualifying need related to a public health emergency" which is when the employee is unable to work (or telework) due to caring for a child under 18 if their school or daycare has been closed, or the child care provider is unavailable because of an emergency with respect to COVID-19 declared by federal, state or local authorities.
Paid vs Unpaid Leave: The first 10 days of leave are unpaid (but see Paid Sick Leave below), but an employee may elect to substitute any accrued paid vacation leave, personal leave or medical/sick leave.
If leave is more than 10 days, it must be paid at two-thirds (67%) of employee's regular rate of pay based on the number of hours the employee normally is scheduled to work as determined by the Fair Labor Standards Act. In all cases, an employer need not pay an employee more than $200 per day and $10,000 in the aggregate.
Employees are required to provide notice as soon as practicable when the need for leave is foreseeable.
Return to Work: Generally, employers with 25 or more employees must restore employees to their positions following their return. Employers with less than 25 employees also must reinstate employees unless certain conditions are satisfied (i.e., the employee’s position does not exist following the period of leave due to economic conditions or other changes in operating conditions which affect employment and are caused by a public health emergency during the leave period, where the employee is offered a substantially equivalent position, or where the employer could not provide a substantially equivalent position but the employee remains on a recall list for one year after the leave).
Exemptions: The U.S. Department of Labor (DOL) will have the authority to exempt businesses with fewer than 50 employees from having to provide emergency leave if doing so would jeopardize the viability of the business. In addition, an employer of an employee who is a healthcare provider or emergency responder may elect to exclude that employee from the leave provisions provided by the Act. Employers with fewer than 50 employees also appear exempt from private suits brought by employees. However, they are still subject to enforcement actions by the DOL.
Effective Date of the Law: The Emergency Family and Medical Leave Expansion Act is scheduled to expire on Dec. 31, 2020 and goes into effect on April 2, 2020.
Emergency Paid Sick Leave Act
Any employee that has been employed for at least 30 days, is entitled to paid sick leave for the following situations:
1. The employee is subject to a federal, state or local quarantine or isolation order related to COVID-19. (full pay, capped at $511 per day per employee ($5,110 aggregate).
2. The employee has been advised by a healthcare provider to self-quarantine because of concerns related to COVID-19. (full pay, capped at $511 per day per employee ($5,110 aggregate).
3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis. (full pay, capped at $511 per day per employee ($5,110 aggregate).
4. The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2). (2/3 pay, capped at $200 per day/$2,000 aggregate).
5. The employee is caring for a child if the school or daycare has been closed, or the childcare provider is unavailable, because of COVID-19 precautions. (2/3 pay, capped at $200 per day/$2,000 aggregate).
6. 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. (2/3 pay, capped at $200 per day/$2,000 aggregate).
Full time employees are entitled to up to 80 hours of paid sick leave, and part-time employees are entitled to a number of hours equal to the number of hours that such employee averages over a two-week period.
The paid sick days required by the new law must be offered in addition to any existing leave benefits and employers are not allowed to change their policies after enactment to avoid the new requirements.
While not explicitly stated in the Act, it appears that this paid time off can be used during the otherwise unpaid 10 days of FMLA leave described in the FMLA Leave section above, such that an employer would be responsible for up to approximately 12 weeks of paid leave total (at least 10 of which would be at 2/3 the employee’s regular rate of pay).
Employees may use paid sick leave under the Act prior to any existing paid time off entitlements accrued by the employee.
Employers may exclude employees who are healthcare providers or first responders from the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act..
The law expires on Dec. 31, 2020 and goes into effect on April 2, 2020.
Tax Credits for Paid Leave – Employer Benefits
To offset the costs of these two new rules on FMLA Leave and Sick Pay, the law created employer tax credits and exemptions from employer paid Social Security taxes. These credits are dollar-for-dollar credits based on the wages paid but are limited by the daily and aggregate caps. Employers will receive a refundable tax credit (against the employer portion of Social Security taxes) for the amounts required to be paid to employees as described in the FMLA Leave and Paid Sick Leave sections above, up to specific per-employee maximum per-day amounts (up to $200 per day for FMLA leave and up to $200 or $511 per day for paid sick leave, depending on the reason for the leave) and specific per-employee maximum aggregate amounts (up to $10,000 for FMLA leave and up to $5,110 for paid sick leave).
The employer portion of Social Security taxes is not imposed on the amounts required to be paid to employees. Although Medicare taxes are imposed on such amounts, the employer portion of Medicare taxes is also creditable against the employer portion of Social Security taxes and is otherwise refundable.
There will be a time lag between when the leave wages are paid and when the employer receives the cash benefit of the credits.
Employers also receive a credit for certain amounts paid or incurred to provide and maintain a group health plan, to the extent allocable to the qualified family leave wages or qualified sick leave wages as determined by Treasury.
Employers may retain the full amount of the Payroll Tax Credit from the payroll taxes they are otherwise required to withhold and/or pay to the Internal Revenue Service (“IRS”) (i.e., withheld federal income taxes, employee share of Social Security and Medicare taxes and employer share of Social Security and Medicare taxes, in each case, with respect to all employees (and not just employees who have taken PSL or FMLA+)). If there are not sufficient payroll taxes to cover the Payroll Tax Credit, employers will be eligible to receive a refund from the IRS by filing a request for an accelerated payment from the IRS for the difference. The IRS expects to process these requests within two (2) weeks or less.
DOL will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the above laws. Under this policy, the DOL will not bring an enforcement action against any employer for violations of the above laws so long as the employer has acted reasonably and in good faith to comply with the above laws. The DOL will instead focus on compliance assistance during a 30-day period.
Please contact your tax professional to ensure that you are taking advantage of all available tax credits.
Posting Notice: By April 1, 2020, employers are required to post, and keep posted, in conspicuous places on the premises of the employer, a notice, to be prepared or approved by the Secretary of Labor, of the requirements described in the Response Act. Since many employees are now teleworking due to COVID-19, employers may satisfy this posting requirement by emailing or direct mailing the notice to employees or posting the notice on an employee information internal or external website. The model notice is available at https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf
Termination/Furloughs
Although not specifically addressed in the new law, if an employee becomes eligible under the law while actively working, it is unlikely that an employer can lawfully terminate the employee’s employment solely to prevent the employee from receiving the COVID-19 FMLA and Paid Sick Leave benefits.
However, if there are legitimate business reasons for the termination of employment, such as the termination of employment of all employees in a specific department or the permanent closure of a facility, an employer may be able to terminate an employee who is taking a protected leave.
The law does not prohibit terminations of employment for legitimate business reasons. Furthermore, furloughed employees are not eligible for benefits under these acts.
COVID-19 Testing Costs
All employer health plans must cover the cost of COVID-19 testing for plan participants (whether employees or their covered dependents) without any cost-sharing (such as deductibles, copayments or coinsurance).
Employers with self-insured plans will experience an increase in costs under their health plans to pay for this testing without any cost-sharing. Employers with fully insured health plans should not have any immediate increased costs but may see increases in premium costs related to the testing upon the health plan renewal.
FAQ’s
1. If an employee is home with his or her child because the school or place of care is closed, or childcare provider is unavailable, does the employee get PSL, FMLA+, or both?
The employee may be eligible for both types of leave, but only for a total of 12 weeks.
2. Can an employer deny an employee PSL if it already provided such leave to an employee before April 1, 2020 or if the employee uses other types of paid sick leave under State or local law or under the employer’s policy?
No, PSL is a new leave requirement that is effective beginning on April 2, 2020 and is in addition to other leave provided under Federal, State, or local law, an applicable collective bargaining agreement or an employer’s existing policy.
3. What records must an employer keep when an employee takes PSL or FMLA+?
If they intend to claim a Payroll Tax Credit, the employer should retain appropriate documentation and consult IRS applicable forms. If an employee takes FMLA+, the employer may also require the employee to provide any additional documentation in support of such leave, to the extent permitted under the FMLA, including notice of the school closure from a government, school or day care website.
4. May the employee take PSL intermittently?
If the employee is teleworking and the employer allows it, then yes. If the employee is not teleworking and the PSL is taken in connection with a school closure or unavailability of childcare and the employer agrees, then yes. If the employee is not teleworking and takes PSL for any other reason, then PSL cannot be taken intermittently; in such event, the employee must continue to take PSL until the employee either (1) uses the full amount of PSL or (2) no longer has a qualifying reason for taking PSL.
5. If the employer closed the worksite on, before or after April 1, 2020, does it have to provide PSL and FMLA+?
No (but see Q&A 6). If the employer sent the employees home and stops paying them because it does not have work for them to do, the employees will not get PSL or FMLA+, but the employee may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements). This is true whether the employer closes the worksite for lack of business or because it is required to close pursuant to a Federal, State or local directive.
6. If the employer closes the worksite while an employee is on PSL or FMLA+, what happens?
The employer must pay for any PSL or FMLA+ used by the employee before the employer closed. As of the date the employer closes the worksite, the employee is no longer entitled to PSL or FMLA+, but the employee may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements).
7. If the employer is open, but places employees on furlough on or after April 1, 2020, can the employees receive PSL or FMLA+?
No, if the employer furloughs employees because it does not have enough work or business for the employees, the furloughed employees cannot take PSL or FMLA+. The furloughed employees may be eligible for unemployment insurance benefits (unless the employer is paying the employees pursuant to a paid leave policy or State or local requirements)
8. If the employer reduces the scheduled work hours of employees, can the employees use PSL or FMLA+ for the hours that the employees are no longer scheduled to work?
No, because the employees are not prevented from working the hours due to a COVID-19 qualifying reason, even if the reduction in hours was somehow related to COVID-19. An employee may, however, take PSL or FMLA+ if a COVID-19 qualifying reason prevents the employee from working his or her full-time schedule; in such case, the amount of leave will be based on the work schedule before it was reduced.
9. May employees use an employer’s preexisting leave entitlements to ‘top-up’ PSL and FMLA+ payments by taking both the preexisting leave and either PSL or FMLA+ concurrently?
No, unless both the employer and the employee agree to permit such usage. Even if both the employer and employee agree, the employer will not receive a Payroll Tax Credit for any such ‘top-up’ payments. Employers who have preexisting FMLA policies that permit the substitution of paid leave for unpaid FMLA and who do not want to permit such substitution for FMLA+, should consider informing employees of this point in conjunction with posting the Response Act model notice.
10. Do employees have a right to return to work after taking PSL or FMLA+?
Generally, yes (but special rules apply for employers with fewer than 25 employees as discussed below). The Response Act requires employers to provide the same (or a nearly equivalent) job to an employee who returns to work following leave. The employer is prohibited from firing, disciplining, or otherwise discriminating against employees because they used PSL or FMLA+. The employee is not protected, however, from employment actions, such as layoffs, that would have affected the employee regardless of whether the employee took PSL or FMLA+. This means, the employer can lay off employees for legitimate business reasons. Employers also may refuse to return employees to work if they are highly compensated “key” employees as defined under the FMLA.
11. Do employees have a right to return to work after taking PSL or FMLA+ if they work for an employer with fewer than 25 employees?
Generally, yes, unless the employee’s position no longer exists due to economic or operating conditions due to COVID-19 reasons and affecting employment, and the employer makes reasonable efforts to restore the employee to the same or an equivalent position, and makes reasonable efforts to contact the employee if an equivalent position becomes available for up to one (1) year following the leave.
12. Do employees qualify for PSL or FMLA+ even if they have already used some or all of the FMLA leave to which they were entitled under the FMLA?
Eligible employees are entitled to take PSL regardless of how much leave the employee has taken under the FMLA. If the employer was subject to the FMLA before April 1, 2020, then the employee’s FMLA+ may be limited depending on how much regular FMLA leave the employee has taken during the 12-month period the employer uses for FMLA leave. The employee may only take a total of 12 weeks of leave for FMLA and FMLA+.
