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The Families First Coronavirus Response Act (“the Act”) was signed by President Trump on March 18, 2020, to help the United States fight the outbreak of Covid-19 by giving small to medium sized American businesses (with fewer than 500 employees) funds to cover the costs of providing Coronavirus-related paid leave to their employees. The Act provides for refundable payroll tax credits designed to reimburse employers dollar-for-dollar for the cost of providing leave to their employees affected by Covid-19. It will enable employers to keep employees on their payrolls while ensuring workers are not forced to choose between a paycheck and protecting their personal and their family’s health.
What Types of Leave Are Covered?
The Act will provide for employees of businesses with fewer than 500 employees to take up to 80 hours of paid sick leave and child care leave when their children’s schools are closed or child care providers are unavailable.
This provision covers 100% of employees’ pay if they are unable to work because they are quarantined and/or are experiencing Covid-19 symptoms and seeking a medical diagnosis.
This provision covers 2/3 of employees’ pay if they are unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to Covid-19.
Child Care Credit
Employees who are unable to work to care for a child whose school is closed, or whose child care provider is unavailable for reasons related to Covid-19, may receive an additional ten weeks of expanded paid leave under FMLA at the rate of 2/3 pay.
For this credit, employers are entitled to receive a refundable tax credit equal to 2/3 the regular rate of pay, capped at $200 per day and a total aggregate amount of $10,000 for up to ten weeks of qualifying leave. Employers may also be entitled to an additional tax credit based on the costs to maintain health insurance coverage for the eligible employee during the leave period.
What Amount is Covered?
For an employee unable to work due to being in quarantine, having symptoms of Coronavirus, and seeking medical testing, employers may receive a refundable tax credit at the employee’s regular rate of pay, up to $511 per day for a total of ten days, or $5,110 in the aggregate.
For employees caring for someone with Coronavirus, or caring for a child whose school is closed or whose child care provider is unavailable due to Coronavirus, employers may claim a credit for 2/3 the employee’s regular rate of pay, up to $200 per day for a total of ten days, or a total aggregate of $2,000.
How Will Employers Be Reimbursed?
Employers covering employees for paid sick leave will be reimbursed 100% of the costs. Health insurance costs are also included in the tax credit, and employers face no payroll tax liability. Even self-employed individuals may take advantage of this tax credit.
The government has indicated that reimbursement will be quick and easy to obtain, with an immediate dollar-for-dollar offset against payroll taxes provided. Where a refund is owed, the IRS will send it as quickly as possible.
Beyond that, the requirements are subject to a 30-day non-enforcement period for good faith compliance efforts. In other words, if your employer retains funds it would otherwise pay to the IRS in payroll taxes to cover paid leave, it may seek an advance from the IRS by submitting a streamlined claim form to be released in the coming days.
How Will The Tax Credits Work?
Normally, when employers pay employees their paychecks, employers are required to withhold federal income taxes and the employees’ share of Social Security and Medicare taxes. Employers must deposit these federal taxes with the IRS.
However, under the new Act, 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 these amounts with the IRS.
The payroll taxes available for retention by employers include 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 these amounts do not cover the cost of qualified sick and child care leave paid, employers will be able to file a request for an accelerated payment from the IRS. The IRS expects to process these requests within two weeks or less.
What Small Businesses and Employees Should Do
First, understand the law and how it will work. This Act is extremely helpful for employers who are considering the possibility of laying off workers to avoid health care and leave costs. The purpose is to permit those employees who need leave to take it now and return to work after they and their families have recovered.
If you believe your employer is planning to lay employees off, you are encouraged to share this information with your employer. Direct them to the link at the bottom of this article to the IRS’s information page. Urge your employer to consider whether layoffs are necessary in light of this new Act.
If you are an employer with concerns regarding how this Act will work, do not hesitate to contact an employment lawyer for clarification. It is important that all payroll decisions be reviewed by someone knowledgeable in the Department of Labor requirements, especially in light of the near-constantly developing landscape due to the outbreak of Covid-19.
Note that the United States Government is in the process of finalizing a 2 trillion-dollar stimulus bill that purports to provide additional support to small businesses struggling because of the Covid-19 outbreak. This site will be updated to help explain that legislation after it has passed, so you are encouraged to revisit this website for updates.
Whether you are an employee affected by Coronavirus or a small to mid-sized employer with questions about how to best take advantage of this new Act, the employment attorneys at Gillespie, Shields, Goldfarb & Taylor can assist you with their knowledge of labor rules, experience resolving employment disputes, and experience in advising small businesses. Contact us to schedule a consultation today.
The information contained on this site is not, nor is it intended to be, legal advice. You should consult an attorney for legal advice concerning your individual situation. We welcome you to contact us via phone, electronic mail, or through this website. However, contacting us does not create an attorney-client relationship. Please do not send us confidential information until such time as an attorney-client relationship is established.