UPDATE ON THE FAMILIES FIRST ACT

On Wednesday, March 18th, Congress passed and the President signed into law the Families First Coronavirus Response Act. The final law included some changes from the original house bill. Here is an overview of the changes to the two sections of the bill related to employee leave rights (Family Medical Leave and Emergency Paid Sick Leave): 

Family Medical Leave

As previously noted, the new law amends the Family and Medical Leave Act (“FMLA”). Previously FMLA provided employees up to 12 weeks of unpaid leave under certain circumstances, and an employee must work for an employer for at least one year to be eligible for benefits. Here are the key changes from the house bill:

  • The new law provides for up to 12 weeks of paid family and medical leave at two-thirds of the employee’s normal pay, which is now capped at $200 per day ($10,000 in the aggregate).

  • The new law further provides the benefits apply only to employees who cannot work because their minor child’s school or child care service is closed due to a public health emergency.

  • The original house bill extended the leave benefits to quarantined employees, employees who must take care of a family member because of coronavirus, and employees of businesses directed or recommended to close due to a public health emergency. The final law has removed this eligibility.

  • The final bill provides that benefits expire on December 31, 2020.

The Sick Pay Act

The new law continues to require most employers with 500 or less employees to provide 80 hours (10 days) of paid sick leave to employees who cannot work because they are quarantined, required to care for a family member who has coronavirus, or required to care for minor children because of a school or daycare closing. Here are the key changes from the house bill:

  • As revised from the house bill, the new law provides employees who are quarantined or experiencing COVID-19 symptoms and are seeking medical diagnosis will receive regular pay, subject to a daily cap of $511 ($5,110 in the aggregate).

  • Employees who must care for others due to coronavirus will receive two-thirds of their regular pay, subject to a daily cap of $200 ($2,000 in the aggregate).

  • As with the Family Leave Act, these benefits will expire on December 31, 2020.

Small Business Exceptions

The provisions of the Family Leave Act and the Sick Pay Act continue to apply to businesses with fewer than 500 employees. Businesses with less than 50 employees may be exempt from the paid leave provisions of the bill if, at the Secretary of Labor’s discretion, compliance will jeopardize the business as a viable concern. It is not clear how lenient the Secretary of Labor will be in making such determinations.

Tax Credits

Paid sick leave payroll tax credits can be claimed on a quarterly basis, equal to 100% of the amount of sick leave wages paid. The credit is limited to $511 per day ($5,110 total) if an employee is taking time off to care for themselves, or $200 per day ($2,000 total) if the sick leave is to care for an individual who is quarantined or showing symptoms of COVID-19, or a minor child whose school is closed. The credit is refundable if it exceeds the amount the employer owes in payroll tax.

Employers who pay family leave wages can use a separate payroll tax provision allowing a 100% credit against the employer’s share of the payroll tax for each employee, limited to $200 per day, or a total of $10,000 per employee. The credit is refundable if it exceeds the amount the employer owes in payroll tax.

Self-Employed Workers

Self-employed workers, including independent contractors and gig economy workers, can claim a credit against their regular income taxes related to sick or family leave. The credit covers 100% of the self-employed individual’s daily self-employment income, or 67% if an individual is taking care of a child whose school is closed. The per-day amount is limited to the lesser of an individual’s average daily self-employment income, or $511 per day if caring for themselves, or $200 if caring for a minor child. The number of eligible days is limited to 10 if related to sick leave and 50 if related to family leave.

Notice Requirements; Guidelines

The Secretary of Labor must provide a model notice that employers are required to post explaining the applicable provisions of the law within the next seven days.

Additionally, the Secretary of Labor must issue guidelines on how to calculate the wages of part-time workers under different circumstances within the next 15 days.

The Secretary of Labor has authority to issue regulations “to ensure consistency between the Sick Leave Act and Division C (the FMLA Section) and Division G (the Tax Credit Section).”

Please note this is a summary of the bill signed into law on Wednesday, March 18th, by President Trump. A link to the text of the bill can be found here. Dunlap & Seeger will continue to provide updates as they are available.

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