Families First Coronavirus Response Act
On March 18, 2020 the Coronavirus relief package was signed into law. Titled the “Families First Coronavirus Response Act”, the act has created a temporary sick paid leave program and a temporary expansion to family/medical leave act. The law goes into effect April 2, 2020 and is effective until December 31, 2020.
The law requires employers with fewer than 500 employees provide emergency sick leave and expands family/medical leave for employees employed for at least 30 days. Under the law, businesses must provide 2 weeks paid sick leave and up to 12 weeks of protected family/medical leave) with 10 weeks paid (not less than 2/3 of employee’s regular rate of pay and capped at $200 per day) and two weeks that can be unpaid.
Sick leave is for employees who are seeking diagnosis or have been quarantined for coronavirus (up to $511 per day) and for employees taking care of a quarantined family member or child due to a school closure from coronavirus (capped at $200 per day).
While employers with more than 25 employees must allow employees to return to work after family/medical leave or sick leave, employers with fewer than 25 employees are exempt from this requirement if they are under economic hardship.
In order to pay employees, the law created a tax credit of 100% of the qualified wages paid to employees. This refundable credit will be applied against payroll taxes. Self-employed individuals can also qualify for a refundable tax credit of 100% of sick leave or 67% of family/medical leave. For self-employed individuals, the credit is applied against income taxes and has the same limits of $511 and $200 above. The law specifies that the Treasury can develop the guidance on what documentation self-employed individuals will need to submit for their credit.
Note: the tax credit is only available to employers with fewer than 500 employees that are required to offer paid sick leave or family/medical leave as a result of this new law. For employers with less than 50 employees, there is an exemption from the extended leave requirement for school closing and childcare if it will cause harm to the business’s ability to operate. The IRS has yet to issue the information an employer will need to provide in order to apply for the exemption.
With these new tax credits available, it is important that employers develop an internal system to track the sick leave and family/medical leave time used by employees due to the virus. It is important for employers to also ensure employee medical data remains private in the process.
We will continue to keep you posted as new developments occur and we get more details on applying for the tax credits related to sick leave and family/medical leave. If you have any questions about this or how it may impact your business and employees, please feel free to reach out.