By: Jaymen Chavda, Minh Luong and Prema Roddam
The ongoing coronavirus pandemic has prompted the federal government to enact the Families First Coronavirus Response Act (FFCRA), to protect Americans against a significant economic impact. The FFCRA provides separate benefits to employers if they intend to maintain their workforce, or if they decide to reduce staff. Employees are protected if they are experiencing symptoms or need to care for another that has indications of COVID-19.
The FFCRA came into effect on April 1, 2020 and will expire December 31, 2020, unless otherwise extended. While maintaining their workforce during the pandemic, employers with fewer than 500 employees must abide by the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act (Expanded FMLA). In return for payment to employees, employers will receive payroll tax credits for the amount of payments made to employees. If employers temporarily or permanently terminate their workforce due to the pandemic, the employees may receive expanded federal unemployment benefits, in addition to state unemployment benefits, as discussed in detail below.
Emergency Paid Sick Leave Act
In an unprecedented action, the federal government is requiring employers with less than 500 employees, regardless of how long they have been employed, to maintain a paid sick leave provision for employees experiencing the following scenarios, as the employee:
- Is under a federal, state, or local quarantine or isolation order;
- Is advised to self-quarantine due to COVID-19 concerns by a healthcare provider;
- Is seeking a medical diagnosis for COVID-19 symptoms;
- Is caring for someone who must self-quarantine or isolate based on medical recommendation or government mandate;
- Has to take care of their child whose care provider or school is not available due to coronavirus precautions; or
- Is experiencing any other substantially similar condition, specified by departments of the US government
The pay rate for the employee depends on the nature of the leave and whether they are full or part-time. Full-time employees are eligible to receive up to 80 hours of paid sick leave. Part-time employees are eligible to receive the average number of hours they work over a two-week period.
If the employee (full or part-time) is experiencing symptoms themselves, or are subject to a quarantine order, namely reasons (1) through (3) above, then the employee may receive up to $511.00 per day, and $5,110.00 in totality under this Act. For those employees who take leave to care for others, (4) through (6) above, is limited to two-thirds of their regular pay, not to exceed $200.00 per day, or $2,000.00 total.
This benefit is available to an employee without use of employer provided benefits, such as company sick time or paid time off. An employer cannot require an employee to use PTO prior to receiving paid sick time under FFCRA. The Act requires the employer to protect the employee’s job and they cannot be replaced while on qualifying paid sick leave. The employee must return to work as soon as the need for leave ends, even if the employee has not used all the paid sick time available under the Act. Employers are prohibited from discriminating or retaliating against any employee who takes paid leave under the Act or has filed a complaint or instituted a proceeding under or related to this Act.
To note, there is discussion of an exception for employers with fewer than 50 employees who can demonstrate that providing paid leave would “jeopardize the viability of the business as a going concern. In the coming weeks, the Secretary of Labor will discuss the process and documentation needed to prove the hardship to the employer.
In addition to the paid sick leave credit, the Expanded FMLA requires an eligible employer to provide employees paid family leave when they have been employed for at least thirty days. Required pay is two-thirds of the employee’s regular pay for up to 10 weeks, for a maximum of $200 per day or $10,000 in the aggregate (for 10 weeks). This leave is required when employees cannot work or telework because they must care for a child whose school or child care provider is unavailable due to COVID-19.
Employers who qualify can receive a tax credit for the entire amount of qualified sick and family leave wages paid, in addition to any qualified health plan expenses and Medicare tax, for the period from April 1, 2020, to Dec. 31, 2020. The credit can be taken against the employer’s portion of Social Security taxes which are paid to all employees. Any excess amount that the employer has paid is treated as an overpayment which will be refunded to the employer.
Employers who pay these qualified leave wages can retain all federal employment taxes to the extent of the amount paid in addition to the healthcare expenses and the applicable Medicare tax imposed on these amounts.
As an alternative to the above paid sick leave provisions under the FFCRA, an employer may choose to terminate their workforce, due to economic concerns. The third aspect of the FFRCA applies, which provides $1 billion in aid to assist states in processing and paying unemployment insurance benefits. The Act creates a Federal Pandemic Unemployment Compensation (FPUC) program, which increases the amount of unemployment benefits, extend the duration for benefits and expand the number of people who will qualify.
Under the Act, a person is eligible for unemployment benefits if he or she is unable to work or is working reduced hours as a result of the coronavirus. For the first time in history, part-time and self-employed workers, including independent contractors, freelancers, and gig workers, are eligible. However, the new law does not cover workers who are able to work from home, those receiving paid sick leave or paid family leave. It also does not cover workers who are new to the workforce and have never worked.
Workers that qualify for the FPUC can receive $600 per week from the federal government for up to four months and until July 31, 2020. This $600 per week is in addition to the individual’s state unemployment benefit, which varies from state to state. In many cases, the unemployment benefits will be roughly equivalent to the employee’s normal take home pay. Since some employees will receive roughly equivalent compensation from the government, layoffs and furloughs are an option for struggling businesses that have been forced to closed during this health pandemic.
The Act provides for an additional 13 weeks of benefits in addition to the state’s maximum number of weeks. The number of weeks available varies from state to state.
The practical aspect of maintaining or terminating the workforce can be daunting. Please contact the Chugh LLP office closest to you to discuss the best options tailored to your business.