The federal government’s initial response to the Coronavirus’ effect on businesses and the nation’s employees has arrived in the form of the Families First Coronavirus Response Act. There are many provisions to the Act but we wanted to provide you with a summary of the most frequently asked concerns from our business clients as well as their employees. Whether you are the business owner or an employee of an applicable employer, these new laws apply to most of us. The new law takes effect on April 2, 2020 and will remain effective until December 31, 2020.
While these laws will be helpful for us to navigate these uncharted times, we know that there are other concerns each of you have as it relates to your business or family life. Below are the summary of three key provisions.
FMLA Expansion - Paid Public Health “Emergency” Leave
Eligibility: Normally, the Family and Medical Leave Act (FMLA) applies to employers with more than 500 employees. The Coronavirus Response Act amended the FMLA to add a paid-leave requirement related to Covid-19. This Expansion now applies to employers with fewer than 500 employees.
The employee must have been employed for at least 30 calendar days by the employer and is unable to work (or telework) because the employee must care for their child who is under 18 years of age and whose school or place of care has closed due to the COVID-19 public health emergency.
Benefit: A qualifying employee may take up to 12 weeks of leave. The initial 10 days of leave are unpaid, but the employee may elect to use accrued sick pay, vacation or PTO. After the initial 10-day period, an employee is entitled to receive two-thirds of the employee’s regular rate of hourly pay for the hours they are normally scheduled to work, up to a maximum of $200 per day and $10,000 in total. For employees with fluctuating workweeks regarding hours worked, the employer may use an applicable average number of hours.
Wages required to be paid under the emergency family leave provisions will not be subject to the 6.2 percent social security payroll tax typically paid by employers on employees’ wages.
Emergency Paid “Sick” Leave Related to COVID-19
Eligibility: Private company employers with fewer than 500 employees are required under the Coronavirus Response Act to provide employees, regardless of how long they have worked for the employer, with paid sick leave if any of the following six situations related to COVID-19 affect the employee.
1. If under a federal, state or local quarantine or isolation order
2. If advised by a health-care provider to self-quarantine
3. If employee is experiencing symptoms of COVID-19 and is in the process of a medical diagnosis
4. If the employee is caring for an individual who is subject to either number 1 or 2. (2/3 pay rule*)
5. If the employee is caring for their child because of the closure of the child’s school or daycare (2/3 pay rule*)
6. The employee is experiencing a situation that was specified by the Department of Health and Human Services as substantially similar to the previous 5 (2/3 pay rule*)
Benefits: Full-time employees can receive up to 80 hours under situations 1-3, or 2/3 of their regular pay for situations 4-6.
Part-time employees get the number of hours worked on average over a 2-week period for situations 1‑3, or 2/3 of this pay for situations 4-6.
The amount of paid sick leave provided for the first three situations cannot exceed $511 a day and a total of $5,110. The amount of paid sick leave provided for the fourth, fifth, or sixth situations cannot exceed $200 a day and a total of $2,000.
Wages required to be paid under the emergency sick leave provisions will not be subject to the 6.2 percent social security payroll tax typically paid by employers on employees’ wages.
Employees cannot be required by their employer to search for or otherwise provide a replacement employee to cover work hours as a condition of receiving this paid sick leave related to COVID-19.
The period of this paid sick leave can start at any point in 2020, although hours of this leave not used in 2020 cannot be carried over into 2021.
Employers would be required to provide employees with notice of the availability of this leave. Although the Coronavirus Response Act specifies that the notice would need to be posted in conspicuous places on the employer’s premises, it is reasonably expected that practical implementation of the notice requirement will necessitate that employers provide employees with this notice electronically. The Labor Department is to create a model notice for this leave by the seventh day after the enactment of the measure.
Employers can require employees who have received at least one day paid sick leave related to COVID-19 to provide the employer with reasonable notice as to their health status as a condition of continuing to be able to use this paid sick leave.
Self-Employed Individuals are allowed a tax credit against their self-employment tax if they are impacted by any of the six triggering events. However, the credit is subject to the daily limit of 67% of average daily self-employment income, or $200. The Bill requires self-employed individuals to maintain documentation to establish self-employment eligibility as prescribed by the Secretary of the Treasury.
How Are Businesses Going to Pay for This?
Employers who provide the above leave will be eligible to receive a 100% payroll tax credit for these costs. Employers may deduct the amounts from payroll taxes. Because this comes from the social security contribution, any amounts in excess of the social security tax liability will be paid directly by the Treasury to the Employer. For the self-employed, these credits will be applied against the self-employment tax.
In addition to these new acts, employers should be aware of CDC recommendations and current employment laws.
1. Sick employees need to go home and stay there. They should talk to their healthcare providers for guidance but you should not require a medical note to return to work. You may ask if they have COVID-19 symptoms but not specific symptoms.
2. Employees with a sick family member should stay home if they have symptoms of COVID-19.
3. If an employee does not want to come in yet they do not have symptoms or a family member with symptoms, you can require them to come to work. Where possible, make work-for-home accommodations.
4. If you send someone home (and they cannot work from home) because you feel that they know someone who was exposed, you should pay them and not make them utilize PTO or other sick leave.
5. If not already established, set work from home policies. These should include expectations of hours of work, expectations of reachability and productivity, check-ins and approvals for office expenses.
6. Hourly employees must be paid for all hours worked even work completed at home. If sent home early, you may owe them a full day’s pay if the expectation is a normal full day’s pay.
7. Salaried employees never get a partial day’s deduction as you can fill in with PTO. If they do any work (even from home) during a workweek, they get a full week’s salary. If they take off for personal reasons you may deduct a full day’s pay.
Options for employers to financially react to the reduction in business include the following:
1. You can reduce the number of hours or hourly rate of pay for hourly employees. This should be done non-discriminately and advance notice be given under your state’s law.
2. You can reduce pay for salaried employees. This can include everyone, certain departments or by types of job. Make sure not to discriminate and make a sound business decision. Salaried employees must make at least $684 per week under federal guidelines. Most state requirements are less than this.
3. Furlough – Temporary reduction in hours of work, or weeks of work. If temporarily closing, you should have an estimated date of re-opening. Communicate in writing your intentions and be honest. These employees are eligible for unemployment. Get their current contact information and personal email address so you can stay in touch.
4. Temporary Layoff – A layoff with intention to rehire, generally within six months. These employees are also eligible for unemployment. Stay in contact with these employees.
5. Permanent Layoff – A layoff with no anticipated rehire date. WARN notice may need to be given.
All of the above options could affect your employee’s benefits such as health insurance. If minimum hours are not met under your policy, the furloughed or temporarily laid off employee will need to go on COBRA or obtain insurance through the Marketplace.
The Small Business Administration (SBA) will work directly with state governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the Coronavirus.
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to help you overcome temporary loss of revenue that you may be experiencing.
Find out more at: www.SBA.gov/Disaster