Families First Coronavirus Response Act: Letter to Business Owners

April 1, 2020 | by Ross Holliday, CPA, CVA, CGMA

Ross HollidayThank you for checking in with us on the latest payroll developments surrounding the COVID-19 legislation, specifically the Families First Coronavirus Response Act (FFCRA) or just the Act. This article only applies to companies with less than 500 employees, and hopefully it clarifies some of your questions. These changes are effective April 1.

The most pressing (and confusing) part of the Act focuses on additional sick leave benefits for employees. The Act is an expansion of the Family Medical Leave Act (FMLA). There are two main expansions under this change:  The Emergency Family and Medical Leave Expansion portion of the Act, and the Emergency Paid Sick Leave portion. Let me break these two sections down for you.

Emergency Family and Medical Leave Expansion

This expansion is temporary and runs through 12/31/2020 and covers all employers with less than 500 employees. (There are some limited exceptions for companies with under 50 employees, and I’ll cover that later.) An “eligible employee” is a full-time or part-time person who has been employed at least 30 days. This definition is different than the previous definition which was at least 12 months and 1,250 hours.

Qualifying Need

The employee must have a qualifying need which under the Act means the employee is unable to work (or telework) due to caring for their child under 18 years old and also the child’s school (K-12) or place of care is closed, or the child care provider of the child is unavailable.

Expanded Benefits

Here is a summary of the benefits pertaining to this section only:

  1. The first 10 days (80 hours) of the benefits under this section can be unpaid. See the Q&A link below for how existing leave may be combined with this portion.
  2. After those 10 days, the employer is obligated to pay at least 2/3 of regular rate of pay for such employees.
  3. These benefits can last for 10 weeks
  4. Pay is capped at $200 per day, and a maximum of $10,000 total per employee. There is no overall employer limit.

 

Emergency Paid Sick Leave

Unfortunately, this section is where things start to get a little confusing. The same definition of employers / employees I described above still apply here. The primary difference for eligible employees here is that all employees, regardless of how long they have worked for their employer, are eligible.

Qualifying Need

This portion of the Act requires employers to pay employees sick time when the employee cannot work or telework due to one of the following six reasons. Keep in mind, the section above just dealt with when the kids are out of school, not so here. I’ve listed all six reasons below, but there are different benefits if an employee is affected under reason 1-3 versus reasons 4-6.

Reasons for Emergency Sick Pay

  1. The employee is subject to a Federal, State or local quarantine or isolation order related to COVID-19. I believe that is all of us in Oregon.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 (they can’t just do it on their own)
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis
  4. The employee is caring for an individual who is subject to an order described in (1) or has been advised as in (2)
  5. The employee is caring for the employee’s child if the school (K-12) or place of care of the child has been closed, or their child care provider (can’t be a relative) is unable due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition to be specified by the federal government. As of now, there is no announcement what these conditions are.

Benefits

Looking back up to the six benefits above, if an employee becomes eligible under items 1-3, that employee is to receive a maximum of $511 per day, or 100% of compensation, whichever is less. If an employee is eligible under items 4-6 above, that employee is to receive a maximum of $200 day or 100% of compensation, whichever is less. They are eligible for these payments for a total of 10 days whether it is under 1-3 or 4-6.

Hopefully you are not too confused yet, and, although there are a lot more details, this is the main part of the Act. Here is a link to the government Q&A’s. https://www.dol.gov/agencies/whd/pandemic/ffcra-questions This Q & A provided by the government is actually pretty good. Not everything will pertain to you, but I think it is worth reviewing.

 

Tax Credits

The final piece of the Act actually tries to help the employers rather than just the employees – which is what I’ve written about so far. Both of the credits offered when paying these benefits are taken against the employer payroll tax currently due, so there is immediate relief for payments made under these provisions.   This provision does not mean you don’t have to pay the payroll tax, but rather you get credit against the payments. This is an important distinction since it may affect your eligibility under other SBA provisions if you do not pay your current payroll tax due.

At a high level, the credits are an offset against the employer share of social security payments. The credit, with some technical limitations, is equal to the amount paid to the eligible employee under the two provisions above. In addition, health care costs attributable to the employee while on sick leave can be combined with these other payments in determining your credit.

 

Exception for Employers with under 50 Employees

Employers with fewer than 50 employees are exempt from providing Emergency Family Medical Leave or Emergency Paid Sick Leave only due to school or place of care closures when doing so would threaten the viability of the small business. So the first key item here is “due to school or place of care closure.” Looking back up the page, that is just item #5 listed above. Employees eligible for any of the other reasons would not exempt employers with under 50 employees. The second qualification, “threatening the viability of the small business”, is determined by one of the three exemptions here:

  1. The use of the leave would result in the business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity.
  2. The employee’s leave from work would create substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities.
  3. There are not enough workers available who are able, willing, and qualified to perform the work done by the employee or employees requesting EPSL or EFML, and this work is needed for the small business to operate at a minimal capacity.

So as you can see the exemption is pretty limited. It is available in some cases, but pretty limited.

OK, so there is definitely a lot here. We are still working though this Act as well as the second legislation that was passed March 27th.  Our offices are currently closed to the public but we are still working remotely at full capacity.  We will strive to keep up on all the latest developments. As always, let us know how we can help, and please stay safe.

 

Other Articles and Resources Related to the Paid Leave Law

5 things to know about the new coronavirus paid leave law By Ryan Golden from HR Dive

Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses to swiftly recover the cost of providing Coronavirus-related leave From the IRS