Congress has passed, and President Trump signed into law on March 18, 2020, the Families First Coronavirus Response Act (FFCRA). The FFCRA provides for three sections that likely will be of particular interest for employers (both for-profit and not-for-profit organizations alike): (1) Emergency Family and Medical Leave Act Expansion, (2) Emergency Paid Sick Leave, and (3) Payroll Tax Credits for Paid Sick and Paid Family and Medical Leave.

Emergency Family and Medical Leave Act (Emergency FMLA Act)

This is available only to those employees who are unable to work or telework due to the need to care for a child under 18 years of age if the child’s school or child care facility is closed due to public health emergency orders by the federal, state, or local governing authorities in connection with COVID-19.  For the first ten days of that leave period, employees may substitute any accrued vacation leave, personal leave, or medical or sick leave employers have under their policies, if the employee so chooses.  Otherwise, the employee might have coverage for the first ten days under the Emergency Paid Sick Leave provisions (see below). For the following ten weeks, employees will be paid for leave at an amount no less than two-thirds of their regular rate of pay, limited to $200 per day and a total employer pay obligation of $12,000 to each qualifying employee for the twelve weeks that include both paid sick leave and expanded family and medical leave related to reasons surrounding COVID-19.

Emergency Paid Sick Leave

Paid sick leave must be offered to employees by employers with less than 500 employees under FFCRA.  Paid sick leave compensation is provided for employees who are unable to work at the office or virtually and likewise meet the following:

1. Are subject to federal, state, or local quarantine or isolation order related to COVID-19
2. Have been advised by a health care provider to self-quarantine due to concerns related to COVID-19
3. Are experiencing symptoms of COVID-19 and are seeking a medical diagnosis
4. Providing care for someone who is quarantined
5. Providing care for a child if the school or child-care facility is closed

It is important to note that steps 1-3 above cannot be self-determined and must be determined by federal, state, or local quarantine orders or a medical health care professional.  Other situations may be provided by Health and Human Services (HHS) at a later time.

Up to 80 hours of paid sick leave compensation is available to full-time employees, and part-time employees are eligible for the traditional number of weekly hours worked as determined by the average of a two-week period.

Payroll Tax Credits (Reimbursement for Employers)

The FFCRA also provides a payroll tax credit to employers that pay sick leave wages for qualified purposes. The credit for each employee equals up to 100% of his or her wages, limited to $511 per day for self-care (categories 1-3 above, up to a max $5,110 credit aggregate available), or $200 if the sick leave is to care for a family member or child whose school or child care facility is closed (categories 4-5 above, up to a max $2,000 credit aggregate available). Businesses with more than 500 employees are exempt from the mandate to pay leave benefits. The Department of Labor has issued initial regulations exempting employers with fewer than 50 employees from the requirement to provide sick pay under FFCRA if the employer can demonstrate such requirements would jeopardize the viability of the employer. The documentation that is required and other key considerations when claiming this exemption are to be provided by the Department of Labor at a later date.

The payroll tax credits noted above are intended to reduce the amount of payroll tax otherwise required to be deposited with the IRS to provide businesses the needed cashflow to pay the above sick and expanded FMLA wages. This is effective April 1, 2020, and is not retroactive.

Below are key contacts within our firm you can reach with questions on how this applies to your organization:

Brian Walgamott – bwalgamott@thf-cpa.com

Canita Gunter Peterson – cgp@thf-cpa.com

Michael Kalifeh – mkalifeh@thf-cpa.com

Winston Howell – wkh@thf-cpa.com

We expect there to be numerous questions regarding the Act, its applicability, and the process for claiming the credit. We also expect further clarification and guidance from various regulatory authorities regarding the interpretation of various components of the Act. We will re-address guidance as we receive it.

We are here to work with you and your payroll providers in answering these questions and to help with your strategies that protect your employees and maximize your cashflow. Please do not hesitate to contact us with your questions.