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Sick Time, Extended Leave, Layoffs, Tax Credits: Navigating HR 6201

By Cristina Garza

On March 18th, 2020, The Families First Coronavirus Response Act was signed into law. The full, enacted bill is located on Congress.Gov, and we encourage you to read it in full. For the purpose of brevity, and to suit our audience,  we will only be discussing the Divisions which affect employers, as it relates to handling extended time off, sick time, unemployment insurance expansions, and payroll tax credits within this article.

Jump to the topics you are most interested in here:

 

For those who prefer to watch, rather than read...

 

 

Please note, this video was created for the benefit of our clients directly after HR 6201 was passed. There is a revision to the tax credits available, please skip to Division G for the corrected information.

 


Emergency Family and Medical Leave Expansion Act

 

Before you dive into the expanded act, it is important to first understand the basics of the FMLA, or the Family Medical Leave Act, as it provides important context. As an employer, you must have a working knowledge of this, as a violation can lead to serious consequences. 

 

FMLA Primer

The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Essentially, if you are a qualified employer, they are a qualified employee, and there is a qualifying event- you must make a reasonable effort to let them take this time off and allow them to return to work to the same role, with the same pay, and the same benefits package. 

 

Eligible Employer- Previously

In order for the employee to be eligible for FMLA they must work for a qualified employer, which includes: 

  • Public agencies, including local, State, and Federal employers, and local education agencies (schools); and
  • Private sector employers who employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year – including joint employers and successors of covered employers.

 

Eligible Employee- Previously

In order to be eligible to take leave under the FMLA, an employee must:

  • Work for an eligible employer;
  • Have worked 1,250 hours during the 12 months prior to the start of leave; (special hours of service rules apply to airline flight crew members)
  • Work at a location where the employer has 50 or more employees within 75 miles; and
  • Have worked for the employer for 12 months. The 12 months of employment are not required to be consecutive in order for the employee to qualify for FMLA leave. In general, only employment within seven years is counted unless the break in service is
    • (1) due to an employee’s fulfillment of military obligations, or
    • (2) governed by a collective bargaining agreement or other written agreement.

 

Qualifying Event- Previously

And, finally the leave must be for a qualifying event including: 

  • The birth of a child and to care for the newborn child within one year of birth;
  • The placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
  • To care for the employee’s spouse, child, or parent who has a serious health condition;
  • A serious health condition that makes the employee unable to perform the essential functions of his or her job;
  • Any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
  • Twenty-six workweeks of leave during a single 12-month period to care for a covered service member with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).

 

On return from FMLA leave, the FMLA requires that the employer return the employee to the same job, or one that is nearly identical (equivalent).

 

If not returned to the same job, a nearly identical job must:

  • Offer the same shift or general work schedule, and be at a geographically proximate worksite (i.e., one that does not involve a significant increase in commuting time or distance);
  • Involve the same or substantially similar duties, responsibilities, and status;
  • Include the same general level of skill, effort, responsibility and authority;
  • Offer identical pay, including equivalent premium pay, overtime and bonus opportunities, profit-sharing, or other payments, and any unconditional pay increases that occurred during FMLA leave; and
  • Offer identical benefits (such as life insurance, health insurance, disability insurance, sick leave, vacation, educational benefits, pensions, etc.).

Updates to FMLA 

The Emergency Family and Medical Leave Expansion Act, enacted due to COVID-19, will go into effect on April 2, 2020 and expire December 31, 2020 and consist of the following changes:

 

Eligible Employer- Through 12/31/20

Previously, the threshold for employers was 50 or more employees for at least 20 workweeks in the current or preceding calendar year, it is now outlined as Fewer than 500 employees”. This expands the employers eligible for FMLA, increasing employer participation. 

 

Eligible Employee- Through 12/31/20

Where previously the eligible employee must have worked 1,250 hours during the 12 months prior to the start of leave, they now must have been employed for at least 30 calendar days. This expands the employee eligibility requirement, allowing more people access to extended time off. 

 

Qualifying Need- Through 12/31/20

The qualifying need has been amended to include the following language:

Employee is unable to work (or telework) due to a need for leave to care for a child under 18 and schools are closed, or the child care provider is unavailable due to a public health emergency.

 

What this means is, while an employer is offering the employee the opportunity to work from home in an effort to to flatten the curve, an employee may need to take extended time off to care for their children as no school or childcare resources are available.

 

Side-by-Side Comparison
  FMLA  FMLA + HR6201 (expires EOY)
Eligible Employer

Public agencies, including local, State, and Federal employers, and local education agencies (schools); and

Private sector employers who employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year – including joint employers and successors of covered employers.

 

Changes language to:

"Fewer than 500 employees'

Eligible Employee
  • Work for an eligible employer;
  • Have worked 1,250 hours during the 12 months prior to the start of leave; (special hours of service rules apply to airline flight crew members)
  • Work at a location where the employer has 50 or more employees within 75 miles; and
  • Have worked for the employer for 12 months. The 12 months of employment are not required to be consecutive in order for the employee to qualify for FMLA leave. In general, only employment within seven years is counted unless the break in service is
    • (1) due to an employee’s fulfillment of military obligations, or
    • (2) governed by a collective bargaining agreement or other written agreement.

 

Changes language to:

Employed for at least 30 calendar days.

Qualifying Need
  • The birth of a child and to care for the newborn child within one year of birth;
  • The placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
  • To care for the employee’s spouse, child, or parent who has a serious health condition;
  • A serious health condition that makes the employee unable to perform the essential functions of his or her job;
  • Any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
  • Twenty-six workweeks of leave during a single 12-month period to care for a covered service member with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).

 

Adds: 

Employee is unable to work (or telework) due to a need for leave to care for a child under 18 and schools are closed, or the child care provider is unavailable due to a public health emergency.

 

 

 

Exceptions

The Secretary of Labor shall have the authority to issue regulations to exempt small businesses with fewer than 50 employees when the imposition of such requirements would jeopardize the viability of the business as a going concern. 

 

Payments To Employees

Where previously FMLA states that the employee may receive up to 12 weeks of unpaid, job-protected leave per year, it now includes language for paid, job protected leave.

While there is no requirement to pay for first 10 days of leave, your employee may use their accrued vacation or sick time to cover this unpaid time. 

After the 10 day period is over, this bill specifies that you must pay your employee: 

    • At least 2/3rd their regular rate of pay, and
    • The number of hours the employee would otherwise be scheduled to work
    • The payments cannot exceed $200 per day or $10,000 in total
    • If schedule varies: 
      • The average hours over the last 6 months , or 
      • The reasonable expectation of the employee at the time of hire

It is important to maintain accurate timekeeping records in order to calculate the average number of hours your employees have worked over the last 6 months and keep offer letters on file, if they indicate the hours you expect a new hire to work. 

 

We recommend the following systems for time tracking:

 

Returning to Work After Extended Leave

The Emergency Family and Medical Leave Expansion Act has noted that it does not apply to employers with fewer than 25 employees if the position no longer exists due to economic conditions or other changes in operating conditions of the employer. However, the employer must make reasonable efforts to restore the employee to a position equivalent to the position the employee held when leave commenced, with equivalent pay, benefits, and related terms of conditions employment. 

 


Emergency UI Stabilization and Access Act of 2020

The Families First Coronavirus Response Act allocates $1 billion in emergency state grants to assist with processing and paying unemployment insurance (UI) benefits under some circumstances. Of that amount, $500 million will provide funding for administrative costs, as long as states have met certain requirements to provide eligible workers with access to benefits.

State requirements include: 

  • States must require employers to provide employees with notice about availability of unemployment benefits at the time of separation of employment.
  • States must ensure that applications for unemployment compensation and assistance with the application process are accessible in person, by phone, or online.
  • States must notify applicants of receipt and processing of (or inability to process) the application.
  • States must express their commitment to maintain and strengthen access to the UI benefits system, including through initial and continued claims.
  • States must demonstrate the steps they have taken or will take to ease eligibility requirements and access to unemployment compensation for claimants, including: 
    • Waiving work-search requirements
    • Waiving the waiting week, and
    • Non-charging employers directly impacted by COVID-19 because of an illness in the workplace or direction from a public health official to isolate or quarantine workers.
      • This means the employers' UI rate will not go up due to the unemployment claim.

 

State Unemployment Insurance Links

Alabama Alaska Arizona Arkansas California
Colorado Connecticut Delaware Florida Georgia
Hawaii Idaho Illinois Indiana Iowa
Kansas Kentucky Louisiana Maine Maryland
Massachusetts Michigan Minnesota Mississippi Missouri
Montana Nebraska Nevada New Hampshire New Jersey
New Mexico New York North Carolina North Dakota Ohio
Oklahoma Oregon Pennsylvania Rhode Island South Carolina
South Dakota Tennessee Texas Utah Vermont
Virginia Washington West Virginia Wisconsin Wyoming
DC Puerto Rico      

 

 


Emergency Paid Sick Leave Act

Historically, sick time laws vary state-by-state and there has been no required sick time imposed by the Federal Government. The Emergency Paid Sick Leave Act now requires employers to pay sick time if: 

  1. The employee is subject to a quarantine or isolation order related to COVID–19. 
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID– 19. 
  3. The employee is experiencing symptoms of COVID– 19 and seeking a medical diagnosis. 
  4. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
  5. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

 

This last italicize bullet is important as it is considered a catch-all. The parameters of this final subgroup have not been clearly delineated and will require additional regulatory clarification. So for now, consider this a nebulous grey area. 

 

Paid Sick Time shall be available for immediate use by the employee regardless of how long the employee has been employed by an employer.

 

Employee Sick Time Hours

  • Full Time employees are entitled to 80 Hours of sick time.
    • Up to $511 per day if you need to take sick for yourself - max $5,111
    • 2/3rds pay, up to $200 per day if you need to take sick time to care for others- max $2,000
  • Part Time are entitled to the number of hours equal to the number of hours that such employee works, on average, over a 2-week period.

 

Again, it is important to keep detailed time records so that you are able to correctly calculate the amount of sick time hours you must pay out. 

 

Important

An employer may not require, as a condition of providing paid sick time under this Act, that the employee involved search for or find a replacement employee to cover the hours during which the employee is using paid sick time. 

It is unlawful for any employer to discharge, discipline, or in any other manner discriminate against any employee who takes leave in accordance with this act.

 

Note from Tina (the Founder):

Don't be a jerk and fire or discriminate against someone for taking time off to take care of their health, their family, or their loved ones. Pretend the person who is asking for time off is your own mother, and treat them with kindness and compassion. You would want to be treated with kindness if the roles were reversed. 

 


Tax Credits for Paid Sick and Paid Family and Medical Leave Act

Source: Technical Explanation Of Division G, "Tax Credits For Paid Sick And Paid Family And Medical Leave," Of H.R. 6201, The "Families First Coronavirus Response Act" 

 

FMLA Tax Credits

Under the provision, employers are allowed a credit against the employer portion of social security taxes in an amount equal to 100 percent of qualified family leave wages paid by the employer during the quarter. Qualified family leave wages for purposes of the credit means wages and compensation paid by an employer which were required to be paid pursuant to the Emergency Family and Medical Leave Expansion Act.

The maximum amount of qualified family leave wages eligible for the credit is $200 for any day for which the employee is paid qualified family leave wages, and in the aggregate with respect to all calendar quarters, $10,000. The provision provides that the credit allowed may not exceed the social security tax imposed on the employer for that calendar quarter on the wages paid with respect to all of the employer’s employees.

If an employer claims a credit under this provision, the amount so claimed is included in gross income. So, if the employer takes a $5,000 tax credit, they cannot also claim $5,000 in payroll expenses which would essentially allow them to double dip. 

 

Examples of how employee wages and employer tax credits work out: 

According to Division C, the Emergency Family and Medical Expansion Act you are required to provide 12 weeks time off, with the first 10 days unpaid. The employee may elect to use their accrued vacation, personal leave, or sick leave to cover this gap. 

 

Example 1. 

Employee Salary: $60,000

Accrued Vacation/Sick Time: 0 (they exhausted it previously)

Total Time Off: 6 Weeks

We must first adjust their salary to 2/3rds its normal amount, and we must not go over the $200/day or $10,000 max. You can always decide to pay the full amount, but you will only get a credit back on the mandated max. 

Normal Wages
Yearly Wages $60,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$28.85

Daily Rate

Hourly Rate x 8 Hours

$230.80

Expected 6 Week Wages 

Daily Rate x 5 Days x 6 Weeks

$6,924.00

 

FMLA Adjusted Wages

Adjusted Yearly Wages

2/3rd Normal Amount

$40,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$19.23

Daily Rate

Hourly Rate x 8 Hours

$153.84
First 2 Weeks Unpaid $0.00

Remaining 4 Weeks Wages Paid

Daily Rate x 5 Days Per Week x 4 Weeks

$3,076.80

Eligible Pay For Employer Tax Credit

Max Daily Rate x 5 Days Per Week X 4 Weeks

$3,076.80

Payroll Tax Credit

Eligible Pay x 6.2%

To be applied against the employer portion of social security tax

 

$3076.74

 

 

Example 2.

Employee Salary: $80,000

Accrued Vacation/Sick Time: 0 (they exhausted it previously)

Total Time Off: 12 Weeks

In this example, your employee has an $80,000 salary, but as you can see this puts them over the FMLA payment and credit limit. 

Normal Wages
Yearly Wages $80,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$38.46

Daily Rate

Hourly Rate x 8 Working Hours

$307.68

Expected 12 Week Wages 

Daily Rate x 5 Days x 12 Weeks

$18,460.80

 

FMLA Adjusted Wages

Adjusted Yearly Wages 

2/3rd Normal Amount

$53,333.33

Hourly Rate

Yearly Wages / 2080 Available Hours

$25.64

Daily Rate

Hourly Rate x 8 Hours

$205.12

Amount Over Daily Max

Daily Max is $200 Per Day

$5.12
Adjusted Daily Rate $200.00
First 2 Weeks Unpaid  $0.00

Remaining 10 Weeks Wages Paid

Daily Rate x 5 Days Per Week x 10 Weeks

$10,000.00

Eligible Pay For Employer Tax Credit

Max Daily Rate x 5 Days Per Week X 10 Weeks

$10,000.00

Payroll Tax Credit

Eligible Pay x 6.2%

To be applied against the employer portion of social security tax

 

$620.00

 

 

Sick Time Credits

Sick Time for Self Care

For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave payroll tax credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. This credit will be applied against the employers portion of social security taxes.

 

Employee Sick Time
Yearly Wages $60,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$28.85
Total Leave 80 Hours

Daily Rate

Hourly Rate x 8 Working Hours

Max $511 per day 

$230.80

Total Wages

Hourly Rate x 80 hours

$2308.00

Eligible Pay For Employer Tax Credit

$2308.00

Payroll Tax Credit

Eligible Pay x 6.2%

To be applied against the employer portion of social security tax

$143.10

 

Sick Time to Care for Others

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a social security payroll tax credit for two-thirds of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

 

Normal Wages
Yearly Wages $60,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$28.85

Daily Rate

Hourly Rate x 8 Working Hours

$230.80

 

Adjusted Wages- Caring for Others

Adjusted Yearly Wages 

2/3rd Normal Amount

$40,000.00

Hourly Rate

Yearly Wages / 2080 Available Hours

$19.23
Total Leave 80 Hours

Daily Rate

Hourly Rate x 8 Working Hours

Max $200 per day if caring for others

$153.84

Total Wages

Hourly Rate x 80 hours

$1,266.40

Eligible Pay For Employer Tax Credit

$1,266.40

Payroll Tax Credit

Eligible Pay x 6.2%

To be applied against the employer portion of social security tax

 

$78.52

 

 

 

Prompt Payment for the Cost of Providing Leave

When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next week (for reference, this blog was posted 03/21/20), eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.

 

Documentation

It is important to maintain time records of when employees are out of work for: 

  • Testing
  • Medical Care
  • School Closures
  • Paid Sick Time
  • Paid Family Leave

 

Detailed time records will keep you out of hot water with the State and Federal Government. Penalties for not complying with FMLA or Sick Time requirements include: 

  • Fines up to $10,000
  • Imprisonment up to 6 months
  • Damages including unpaid wages and attorney’s fees

 

 

Remember, your business assets can be liquidated if you are found guilty of non-compliance. Non-compliance is no joke. 

 

Easing the Burden for Employers

(Updated as of 03/20/20)

On Friday, March 20, the U.S. Treasury, IRS, and U.S. Department of Labor announced their plans for making the paid leave provisions in the Families First Coronavirus Response Act less burdensome for small businesses.

Key points include:

  • To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes.
    • If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
  • The Department of Labor will release “simple and clear” criteria for businesses with fewer than 50 employees to apply for exemptions from the leave provisions related to school and childcare closures; and
  • There will be a 30-day non-enforcement period for businesses making a reasonable effort.

The full IRS announcement can be found here.


 

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