While CARES Act stimulus programs grabbed all the attention throughout the spring and summer, the recent rise in COVID-19 cases nationwide has our firm revisiting the Families First Coronavirus Response Act (“FFCRA”). Note that the FFCRA relief is available to employers even if they previously received PPP loan funding under the CARES Act.
We initially penned a blog on March 24th about the emergency paid sick/family leave requirements and ensuing payroll tax credits for employers with fewer than 500 employees. At the time, it was hard to imagine the plight of the pandemic and the rapidly increasing absences at work.
Upon further review, we believe it’s imperative that our clients fully understand the Act’s rules as we approach the end of the effective period, but also the lucrative benefits that accompany compliance.
A quick highlight of the program summary from the Department of Labor, which is a featured reference on our COVID-19 landing page:
Paid Sick Leave
An employer is required to provide two weeks (up to 80 hours) of paid sick leave where the employee is unable to work due to qualifying reasons for leave.
Expanded Family and Medical Leave
An employer is required to provide two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for another individual, or to care for a minor under 18 years old whose school or child care provider is closed or unavailable for reasons related to COVID-19.
An additional 10 weeks (up to 400 hours) is available to all employees specifically related to the school or child care provider scenario noted above.
MKS: Two common scenarios seem to be unfolding lately; 1) employees are unable to work due to a COVID-19 illness; 2) school/daycare closings are causing major disruptions to the productivity of working parents. Even though the emergency leave act requires employers to compensate for these absences, the employer can turn around and claim valuable credits via a reduction in their payroll tax remittances.
While we suggest consulting with our dedicated pandemic assistance team if desired, the Department of Labor has issued a helpful FAQ page (also a featured reference on our website) with examples and details regarding the many complexities employers/employees may encounter specific to their workforce.
Some common questions our professionals have fielded to date:
Our business has under 50 employees, are we eligible for the exemption from the FFCRA?
MKS: An employer with less than 50 employees must be able to prove that providing paid leave would jeopardize the viability of the business as a going concern. We believe this is a difficult burden to overcome. Consider all businesses under 500 employees required to comply with the FFCRA unless an extreme circumstance requires an attempt to prove exemption.
What qualifies as eligible leave time under these emergency acts?
- Any employee subject to a quarantine or isolation order
- Any employee advised by a health care professional to self-quarantine
- Any employee experiencing COVID-19 symptoms and seeking medical diagnosis
- Any employee caring for an individual subject to (1) and/or (2)
- Any employee caring for a child whose school is closed or childcare is unavailable
MKS: It’s important the employee provides you written documentation of the situation, and it must be related to COVID-19. Feeling ill is not enough – the employee (or individual they are caring for) must seek medical attention via a health care professional or seek a test for the virus. Additionally, if school or daycare is closed it would be advantageous to obtain the communication from the institution. If there is a suitable option (spouse or family member is available) to care for the child isolated at home, employers are not required to pay the sick leave and cannot claim a credit.
How do employers claim the credits after paying employees for qualified leave?
MKS: For reasons (1-3) above, you may receive a full credit up to 80 hours over the effective period (April 1st-December 31st) for compensation due to a qualified absence. This is capped at $511 a day, and $5,110 in total.
For reason (4) above, you may receive a two-thirds credit up to 80 hours over the effective period. This is capped at $200 per day and $2,000 in total.
For reason (5) above, you may receive a two-thirds credit up to 480 hours (two weeks plus an additional ten) over the effective period. This is capped at $200 per day and $12,000 in total.
Included are gross compensation, employer paid health care costs, and employer Medicare taxes related to the absence. You will claim the credit by reducing your payroll tax remittance liability.
For example, you owe $5,000 in payroll taxes, but have $3,000 in qualified paid leave. You will only remit $2,000. This underpayment will be reconciled and claimed on your quarterly or annual payroll filing where you will report the $3,000 of paid leave.
If employers claim credits, what documentation must be kept on file?
MKS: It is best practice to keep written documentation in the employee’s personnel file of each instance where paid leave is taken.
- Name of the employee
- Date(s) for leave requested
- Reason for leave
- Name of health provider or organization advising isolation
- Statement from the employee that he/she is unable to work because of the reason
If the absence relates to caring for a child at home:
- Name of the child being cared for
- Name of the school or care provider that is closed or unavailable
- Date(s) for leave requested
- Statement from the employee that no suitable person is available to care for the child
Do these leave requirements apply if the business is shut down due to a government order?
MKS: No. Your employee must have work that can be done. The most common scenario is a furloughed employee. These individuals are expected to seek unemployment assistance.
What if the employee is able to telework?
MKS: This can be tricky – many businesses are able to operate remotely, yet taking care of children stuck at home can be a full-time job and a major constraint to productivity.
Additionally, an employee may be too ill to work. The DOL suggests open communication between the employer and teleworking employee on whether they can perform their duties. If not, paid sick leave and the ensuing credits are available.
Can we claim these credits for paid leave time from previous payroll filing periods?
MKS: Without precedent, we are unable to offer an opinion on amending previous payroll tax filings to claim credits. However, there does not appear to be contradictory evidence from the guidance issued regarding this strategy. It is certainly worth reviewing instances from April-September to determine the potential windfall given the lucrative nature of the paid leave credits. However, note that any employee wages paid with PPP loan proceeds are not eligible for the FFCRA credits.
