The Families First Coronavirus Response Act–New Paid Leave Mandates for Employers With Fewer Than 500 Employees; Tax Credits To Help Offset Employer Costs

On March 18, the U.S. Senate passed, and President Trump quickly signed, H.R. 6201–the Families First Coronavirus Response Act.

H.R. 6201 contains a number of provisions designed to address the coronavirus (COVID-19) health emergency faced by the U.S. Included are provisions requiring employers with fewer than 500 employees to provide paid leave time to employees. The Act is generally effective no later than April 2 and will continue in effect through December 31, 2020.

Paid Family and Medical Leave 

Under the portion of H.R. 6201 titled the Emergency Family and Medical Leave Expansion Act, employers with fewer than 500 employees must provide employees who have been on the job for at least 30 days with the right to take up to 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) if the employee cannot work (or telework) because of a need to care for his or her child (who is under the age of 18) if the child’s school or place of care has been closed or the child care provider is unavailable due to the COVID-19 health emergency. The legislation is silent on what documentation (if any) an employee will need to provide to an employer to take advantage of the leave.

The first 10 days of leave may be unpaid, but an employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave. The employee must be paid for the remainder of the 12-week leave period at a rate equal to two-thirds of the employee’s regular wages based on the regular hours the employee would normally have been scheduled to work. The amount of paid leave is not required to exceed $200 per day and $10,000 in the aggregate. 

Generally, at the end of the leave, the employer is required to allow the employee to return to work, absent an exception. There is an exception for employers with fewer than 25 workers that meet the following: (i) the returning employee’s position has been eliminated as a result of economic or other operating conditions caused by the COVID-19 health emergency, and (ii) the employer makes reasonable efforts to restore the impacted employee to an equivalent position with equivalent pay, benefits, and terms of employment for a one-year period.

The U.S. Department of Labor has authority to exempt employers with fewer than 50 employees (who are otherwise exempt from the FMLA) from these requirements if they would jeopardize the viability of the business as a going concern. 

Paid Sick Leave

Under the portion of H.R. 6201 titled the Emergency Paid Sick Leave Act, employers with fewer than 500 employees must provide employees¹ (regardless of how long they have been employed) with paid sick leave for an absence because:

• 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 seeking a medical diagnosis.
• The employee is caring for an individual who is subject (1) or (2) above.
• The employee is caring for his or her child because the school or place of care of the child has been closed or the applicable child care provider is unavailable due to COVID-19 precautions.
• The employee is experiencing any other substantially similar condition specified by the Secretary of Health & Human Services.

Full-time employees are eligible for up to 80 hours of paid sick leave and part-time employees are eligible for the number of hours that such employee works, on average, over a two-week period. Paid sick time is generally calculated based on the employee’s regular rate of pay (or two-thirds pay in the case of a leave described in items (4), (5), or (6) above) up to

• $511 per day and $5,110 in the aggregate for an absence described in items (1), (2), or (3) above (a “self-need absence”); and
• $200 per day and $2,000 in the aggregate for an absence described in items (4), (5), or (6) above (a “family-need absence”).

Paid sick time provided to an employee ceases beginning with the employee’s next scheduled work shift immediately following the termination of the need for paid sick time. Paid sick time is not required to be carried over to a subsequent year. 

Employees remain eligible to use paid leave available to them prior to H.R. 6201’s effective date. Employers cannot require that employees use other paid leave provided by the employer to the employee before the employee uses the paid sick time under the act. Additional paid sick leave may be available to employees under state and local emergency laws. On March 16, San Francisco announced the Workers and Families First Program, which will include $10 million in public funding that will provide businesses with partial funding for an additional five days of sick leave pay to workers beyond their existing policies and the new federal requirements. On March 18, Gov. Andrew Cuomo (D-N.Y.) signed S08091, which provides emergency paid sick leave to guarantee workers job protection and provide financial compensation while they are on a mandatory or precautionary quarantine due to the coronavirus. Detailed information regarding the New York state legislation is now posted on the New York state website at https://www.governor.ny.gov/paid-sick-leave-covid-19-impacted-new-yorkers/emergency-covid-19-paid-sick-leave. California, New Jersey, Maryland, Kentucky, Hawaii, Minnesota, and Washington are also considering legislation addressing the impact of the coronavirus on the workforce, according to the National Conference of State Legislatures.

Tax Credits

Employers are assisted with the cost of these mandates through two refundable tax credits–one for the Emergency Family and Medical Leave Expansion Act and the other for the Emergency Paid Sick Leave Act. The credits are applied against an employer’s share of FICA tax for a calendar quarter. Wages paid pursuant to these mandates are not subject to the employer portion of FICA.

Emergency Family and Medical Leave Act Credit
An employer is allowed a tax credit in an amount of up to $200 per day (or portion of a day) of the qualified sick leave wages paid by the employer per employee, up to a maximum of $10,000 for all calendar quarters.

Emergency Paid Sick Leave Act Credit
An employer is also allowed a tax credit for qualified sick leave wages paid pursuant to the Emergency Paid Sick Leave Act. The credit is up to $511 per day for an employee who receives wages for a self-need absence and up to $200 per day for an employee who receives wages for a family-need absence. The aggregate number of days that may be taken into account for the credit is limited to 10 per employee.

Health Care Tax Credit
The Emergency Paid Sick Leave Act tax credit is increased by so much of the employer’s qualified health plan expenses as are properly allocable to the qualified sick leave wages for which such credit is so allowed. Unfortunately, there is little further guidance under H.R. 6201 as to how this additional tax credit will be determined. Further guidance will therefore be needed from the Secretary of the Treasury.

COVID-19 Testing Costs

H.R. 6201 requires group health plans (whether insured or self-insured) to provide coverage, without any cost-sharing requirements (including deductibles, copayments, and coinsurance) or prior authorization or other medical management requirements, for COVID-19 diagnostic/testing products or for items and services furnished to an individual during health care visits (whether at a doctor’s office, at an urgent care center, via telehealth, or in an emergency room) to the extent relating to testing for COVID-19. 

The COVID-19 emergency continues to be the focus of the nation and federal, state, and local authorities. Congress has indicated that H.R. 6201 will soon be followed by additional legislation. Hopefully, guidance from the departments of Labor and Treasury will also be issued quickly to help employers comply with these new requirements. Our Employee Benefits and Employment Law attorneys, as well as our other practice groups, will continue to monitor and keep you informed of additional legislation and activity during this evolving emergency.

To see our prior alerts and other material related to the pandemic, please visit the Coronavirus/COVID-19: Facts, Insights & Resources page of our website by clicking here.

¹ The Department of Labor has the authority to exempt employers with fewer than 50 employees from this requirement if providing this leave would jeopardize the business as a going concern.