In response to the Coronavirus (COVID-19) pandemic, President Trump signed into law the Families First Coronavirus Response Act on March 18, 2020 which will impact many employers. DM Payroll Solutions has outlined the highlights of the new law below.

Emergency Paid Sick Leave

Employers with fewer than 500 employees are required to provide paid emergency sick leave to all employees, regardless of their tenure. This paid sick leave applies to employees that meet the following guidelines:

• Subject to a federal, state or local quarantine or isolation order
• Advised by a health care provider to self-quarantine
• Seeking a medical diagnosis due to experiencing COVID-19 symptoms
• Caring for an individual subject to a government-mandated quarantine or advised by a health care provider to self-quarantine
• Caring for a child if the child’s school or place of primary care has been closed due to COVID-19

The total hours of paid sick leave is limited to 80 hours of wages for full-time employees, while part-time employees would be eligible for the average of hours worked in a 2-week time period.

Extended Leave

The law creates an emergency extended paid leave program that expands the Family and Medical Leave Act (FMLA). Private sector employers with fewer than 500 workers and government entities would have to provide as many as 12 weeks of job-protected leave to employees who have worked at least 30 days and meet any of the following criteria:

• Are complying with a requirement or recommendation to quarantine because of exposure to or symptoms of COVID-19
• Providing care to a family member who is complying with such a requirement or recommendation
• Providing care for a child younger than 18 whose school or daycare has closed because of COVID-19

The FMLA has also been amended now to apply to businesses with less than 50 employees previously not subject to the act, to now provide job-protected leave if it is related to the COVID-19 virus. There is a provision that may exempt businesses with fewer than 50 employees if the leave would jeopardize the viability of their business.

The first 10 days of leave can be unpaid, though a worker could choose to use accrued vacation days, personal leave or other available paid leave for unpaid time off. Following the first ten days, employers are required to pay employees an amount equal to at least two-thirds of their normal pay rate.

Employer Tax Credits

Employers with less than 500 employees are eligible for tax credits to cover wages paid to employees while they are taking time off under the FFRCA’s sick leave and family leave provisions through the end of 2020. The tax credits equal 100% of qualified wages paid, subject to the caps noted below.

• The family leave credit for each employee would be for wages of as much as $200 per day while the employee is receiving paid leave, or an aggregate of $10,000.
• The sick leave credit for each employee would be for wages of as much as $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child if their school is closed. In either case, the credit is limited to 10 days of leave per qualifying employee.

Wages paid due to sick leave and family leave provisions are not subject to the employer’s share of the Federal Insurance Contributions Act (FICA) tax (i.e., these payments are not considered to be wages for this purpose).

The credit is refundable if it exceeds the amount the employer owes in FICA tax on a quarterly payroll tax filing. Any credit claimed on a quarterly or refundable filing will increase the taxable income of the employer.

Stay Tuned

DM Payroll Solutions will continue to keep you updated on rapid regulation changes and how they impact your payroll. However, we recommend you consult with your legal counsel to determine what aspects of the new law may be applicable to your business. Working in conjunction with our CPA affiliate firm, Doeren Mayhew, we can connect you with tax advisors to help address your tax questions regarding the new law.