Congress passed and the President signed a
coronavirus-related bill this week. While mainly addressing employment
benefits, it also includes payroll-tax-related provisions to mitigate the effect
of the benefit expansion on employers.
Following is a recap of the Act. It is intended as an introduction and quick reference only. Please review the Act itself for detailed questions.
The Family First Corona Virus Response Act has two key
employment-benefit components. Employers are to be reimbursed for the benefit expansion via a tax credit
mechanism.
A. The Emergency Paid
Sick Leave Act
1. Private employers employing less than 500
employees shall provide an employee with paid sick time if:
i. The
employee is subject to quarantine or isolation due to COVID-19.
ii. The employee has been advised by a health care
provider to self-quarantine due to concerns related to COVID– 19.
iii. The employee is experiencing symptoms of
COVID– 19 and seeking a medical diagnosis.
iv.
The employee is caring for an individual described in (i) or has been advised
as described in (ii).
v. The
employee is caring for a son or daughter of such employee if the school or
place of care of the son or daughter has been closed, or the child care
provider of such son or daughter is unavailable, due to COVID–19 precautions.
vi. The
employee is experiencing any other substantially similar condition specified by
the Secretary of Health and Human Services in consultation with the Secretary
of the Treasury and the Secretary of Labor.
2. Full-time
employees are entitled to 80 hours of paid sick time.
3. Part-time
employees are entitled to the average number of hours worked on over a 2-week
period. For employees with varying
schedules, the employer shall use the employee’s average number of hours per
day over the 6-month period ending on the date the employee takes leave under
the Act.
4. If an employee takes
time off for self-care, the employee shall be compensated at the employee’s
regular pay rate.
i. Not to exceed $511 per day and $5,110 in the aggregate
5. If an employee takes
time off for a sick family member or child, the employee shall be compensated
at 2/3 of the employee’s regular pay rate.
i. Not to exceed $200 per day and $2,000 in the aggregate
6. There are comparable provisions
for the self-employed.
7. The Act expires on
December 31, 2020.
8. The Labor Secretary is
authorized to exempt employers with less than 50 employees if the requirements would
imperil the viability of the business.
9. Employers who violate
this Act shall be considered to have failed to pay minimum wages in violation
of the FLSA and be subject to penalties related to such a violation.
B. Emergency Family and
Medical Leave Expansion Act (E-FMLA)
1. The Act
expands coverage of the Family and Medical Leave Act (“FMLA”) for employers
with fewer than 500 employees. Employees are typically not eligible for FMLA
leave until they have worked at least 12 months and 1250 hours.
i. For
purposes of E-FMLA, this threshold is reduced to 30 days.
2. E-FMLA applies if the employee leave is to
care for a child under 18 if the school or place of care has been closed or
child care provider is unavailable due to a public health emergency.
3. Protected leave can be for up to 12 weeks, but
the first 10 days may consist of unpaid leave.
4. The employee shall be
compensated not less than two-thirds of the employee’s regular rate of pay.
i. Not to exceed $200 per
day and $10,000 in the aggregate (for each employee)
5. There are comparable provisions
for the self-employed.
6. The Act expires on
December 31, 2020.
7. The Labor Secretary is
authorized to exempt employers with less than 50 employees if the requirements would
imperil the viability of the business.
8. Employers who violate
this Act shall be considered to have failed to pay minimum wages in violation
of the FLSA and be subject to penalties related to such a violation.
C. Tax Credits
1. The compensation paid
under the Act is not subject to the Old-Age, Survivors and Disability portion
of FICA (that is, the 6.2%).
2. The compensation paid under
the Act is subject to the Hospital Insurance portion of FICA (that is, the
1.45%).
3. On a quarterly basis,
employers can claim a payroll tax credit for the sum of the following:
a. Wages paid under this Act
b.
Allocable “qualified health plan expenses”
... think health insurance
c. The employer portion
of Hospital Insurance (that is, the 1.45%)
4. Treasury is authorized
to issue Regulations waiving penalties for not making payroll tax deposits in
anticipation of the credit to be allowed.
5. The credit is
refundable if it exceeds the amount the employer owes in payroll tax.
6. Employer taxable
income is to be increased by the amount of payroll credit received.
i. Otherwise
there would be a double tax benefit.
