On Wednesday, March 18, 2020, President Trump signed an emergency bill to expand FMLA leave as well as guarantee paid sick leave for certain U.S. workers. The expansion of the FMLA and the new paid sick leave requirements apply only to private employers who employ fewer than 500 employees and to all public employers with at least one employee. The bill takes effect on April 2, 2020 and will sunset on December 31, 2020.
The law has two separate provisions applicable to private employers with fewer than 500 employees and public employers with at least one employee. The first provision expands the situations under which FMLA leave may be used due to COVID-19 related conditions and provides that a certain portion of said leave be paid. The second provision provides for up to two weeks of paid sick leave for any employee unable to work in person or remotely under certain COVID-19 related conditions.
The first provision amends the FMLA for private employers with under 500 employees and public employers with at least one employee to recognize an FMLA-covered leave for coronavirus related child care.
For covered employers, the FMLA is temporarily revised to allow eligible employees to take up to 12 weeks of job-protected leave if the employee is unable to work or telework due to a need to care for a child under 18 years of age because that child’s school or place of care has closed due to COVID-19.
The first 10 days of emergency FMLA leave may consist of unpaid leave, or the employee has the discretion to use any accrued paid leave (sick, vacation, PTO, etc.) during that period, but the employee must be paid for each subsequent day of leave thereafter. The rate of pay is calculated based on the number of hours the employee would normally be scheduled to work and cannot be less than two-thirds the employee’s regular rate of pay. However, this amount need not exceed $200 per day and $10,000 “in the aggregate.”
These new provisions apply to all employees who have been employed by the employer for at least 30 calendar days, so many employees might qualify for these benefits even if they would not otherwise qualify for FMLA.
The law exempts employers with fewer than 25 employees from the job-protection requirements of the FMLA when emergency leave is taken, provided certain conditions are met. This would include elimination of the employee’s position due to “economic conditions” or other changes resulting from the public health emergency. In addition, employers with fewer than 50 employees may apply to the Secretary of Labor for an exemption to the paid leave requirements “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”
Paid Sick Leave
The second provision requires private employers with fewer than 500 employees and public employers with at least one employee to provide paid sick leave to any employee who falls under any of six specific situations. Full-time employees are entitled to 80 hours of such leave, while part-time employees are entitled to time equal to the number of hours they work on average over a two-week period. The leave does not carry over from one year to the next.
The employer may not require the employee to search for or find a replacement to cover for the hours during which the employee is using paid sick time. The payment is calculated based on the employee’s “required compensation,” which means the employee’s regular rate of pay, and the number of hours the employee would have otherwise been scheduled to work.
The six scenarios under which leave could be provided to the employee under this Act are as follows:
- A Federal, State, or local quarantine or isolation order because the employee is diagnosed with COVID-19.
- A public health advisement that the employee self-quarantine due to concerns related to COVID-19.
- The presence of symptoms of COVID-19 for the employee and a need to seek medical diagnosis.
- To care for a family member described in numbers 1 or 2, above.
- To care for a child because that child’s school or place of care is closed or unavailable due to COVID-19 precautions.
- The employee is experiencing any other substantially similar condition as may be specified by the Secretary of Health and Human Services, Secretary of the Treasury, and the Secretary of Labor.
The maximum amount of pay required under these provisions depends on the reason for the leave. For sick leave taken under subsections (1)-(3), above, pay will not exceed $511 per day or $5,110 total. For sick leave taken under subsections (4)-(6), above, the employer is only required to pay the employee at two-thirds the regular rate of pay. When sick leave is used for reasons (4) or (5), above, the maximum amount of pay received will not exceed $200 per day, or $2,000 total.
Small businesses with less than 50 employees may apply to the Secretary of Labor for an exemption if paying this benefit would jeopardize the viability of the business as a going concern.
Employer Tax Credits
To offset the cost of these new paid-leave requirements, the Act also includes a refundable tax credit for private-sector employers. Mechanically, each employer will receive a credit against the employer’s Social Security tax obligation for any quarter when the employer pays mandated leave benefits. The tax credit itself will be considered taxable income to the employer.
The amount of the credit will, subject to limitations, be based upon the value of the wages paid and certain health insurance costs that the employer provides under these new leave requirements. The specific limits are different depending upon the type of leave and the purpose of the leave:
- Qualified Sick Leave
- Employee Sick Leave. If the employee is absent for the employee’s own health reasons, then the tax credit is limited to the lesser of the employee’s daily wage or $511 per employee, per day, for a maximum of 10 days.
- Family/Child Care. If the employees is absent to care for a family member or child, then the tax credit is the lesser of the daily wage or $200 per employee, per day, for a maximum of 10 days.
- Family Leave
- The tax credit is the lesser of the employee’s daily wage or $200 per employee, per day, to a maximum of $10,000 per employee.
The tax credit can be claimed against the employer’s Social Security tax obligation for each quarter. Because this is a refundable tax credit, the employer will also be entitled to a refund if the tax credit exceeds the amount of Social Security taxes that the employer owes that quarter.
We will need to wait for additional guidance from the Internal Revenue Service before we know the specific requirements for claiming the tax credit, possibly reducing employer payroll taxes and other ministerial matters. Employers will want to be proactive in asking for information and assistance from their payroll providers.
All employers must keep in mind that the provisions of the FMLA not specifically addressed by this new law remain in full force and effect. In addition, the Department of Labor and the EEOC have issued guidance encouraging all employers to be liberal with their leave policies during this outbreak. Additional measures are being considered by Congress and there is a possibility of expansion of this new law. Please stay tuned for any further developments.
Please contact your Buelow Vetter attorney with any questions or concerns.