Families First Coronavirus Response Act

On March 18, 2020, President Donald Trump signed into law the Families First Coronavirus Response Act (the Act). It requires employers with fewer than 500 employees to provide additional family leave and paid sick leave during 2020 for employees affected by the coronavirus. To compensate employers for the paid leave, the law provides a credit for the employer portion—but not the employee portion—of the Old-Age, Survivors and Disability Insurance (OASDI) component of payroll taxes (i.e., the 6.2 percent employer portion of the Social Security Tax).

The Act also funds various coronavirus-related programs, including increased coronavirus testing and changes to social programs. In this tax alert, we address the family leave and paid sick leave aspects of the law.

Emergency Family Leave

The Act requires employers with fewer than 500 employees to provide up to 12 weeks of leave for employees who have worked for the employer for at least 30 calendar days and who are unable to work or telework because they have to care for a minor child:

1. Whose school or place of care has been closed due to the coronavirus public health emergency; or
2. Whose childcare provider is unavailable to work due to the coronavirus public health emergency.

The first 10 days of leave can be unpaid, and employees can choose to use other available paid leave during that time. After 10 days of unpaid leave, the employer must provide paid leave.

• Employees are to be paid at least two-thirds of their regular pay rate for the number of hours the employee would otherwise be scheduled to work.
• Pay for employees with varying hours is calculated using the daily average number of hours over the six-month period ending on the date the employee takes the leave.
• For employees without the prior six-month work period, the hours are calculated using the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would be scheduled to work.  
• The Act caps the paid leave per employee at $200 per day and $10,000 total.

Emergency Paid Sick Leave

The Act also requires employers with fewer than 500 employees to provide paid sick leave for employees who are unable to work due to any of the following conditions:

• They are subject to a Federal, State or local quarantine or isolation order related to COVID–19.
• They have been advised by a health care provider to self-quarantine due to concerns related to COVID– 19.
• They are experiencing symptoms of COVID– 19 and seeking a medical diagnosis.
• They are caring for an individual who is subject to a quarantine order or has been advised to self-quarantine.
• They are caring for their child if the school or place of care is closed or the childcare provider is unavailable due to COVID–19 precautions.
• They are 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.

Affected employers must provide up to 80 hours of paid sick leave for full-time employees and the equivalent of a two-week average of hours worked for part-time employees. Health care providers or emergency responders may elect to exclude their employees from this provision.

Differing from the family leave provision, the paid sick time must be available to employees for immediate use, regardless of how long an employee has worked for the employer. An employee may use the paid sick leave before using any other paid leave, and an employer cannot require an employee to use other paid leave before using the paid sick leave.

The paid sick leave is calculated based on the employee’s required compensation and the number of hours the employee would otherwise be scheduled to work.

• Pay for employees with varying hours is calculated using the daily average number of hours over the six-month period ending on the date the employee takes the paid sick leave.
• For employees without the prior six-month work period, the hours are calculated using the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would be scheduled to work.
• The Act caps paid sick leave per employee at:
  • $511 per day and $5,110 total for employees taking sick leave for themselves; and
  • $200 per day and $2,000 total for employees taking sick leave to care for a family member.

Self-Employed Persons

Self-employed persons are generally entitled to receive an income tax credit for up to 50 days of family leave. The credit is equal to the number of family leave days—not to exceed 50—multiplied by the lesser of:

1. Two-thirds of the taxpayer’s average daily self-employment income; or
2. $200 per day.

In addition, self-employed individuals are generally entitled to an income tax credit for up to 10 days of sick leave. This credit is equal to the number of sick leave days—not to exceed 10—multiplied by the lesser of:

1. Two-thirds of the taxpayer’s average daily self-employment income; or
2. $511 per day (or $200 per day if the individual is caring for a family member).  

Exemption for Small Employers

The Department of Labor is authorized to issue regulations to exempt small businesses with fewer than 50 employees from the paid leave requirements “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”

We understand that operating in this unprecedented COVID-19 environment is challenging. Weaver is here to help you now and in the future. Contact us with questions about this or other tax or business issues related to the impacts of the COVID-19 crisis.

© 2020