On March 18, President Trump signed into law the Families First Coronavirus Response Act (the “Act”). Among the many provisions of the Act, it provides for paid family and sick leave for employees that are unable to work, due to sickness, quarantine orders, or school closures, as a result of the coronavirus outbreak and the subsequent response by state and local officials.
The Act’s provisions related to paid family and sick leave are scheduled to go into effect on April 1, will sunset on December 31, and will affect all employers with less than 500 employees, with certain exemptions for healthcare providers, first responders, and businesses with less than fifty employees that will potentially be unviable due to the expanded leave requirements. The Act contemplates that all paid sick and family leave paid to employees under its provisions will be recouped through a payroll tax credit for employers against the employer portion of Social Security and Medicare taxes. In addition to tax credits for paid sick and family leave, the Act also provides for tax credits against any amounts paid by the employer to maintain health insurance on employees taking leave under the Act. Self-employed individuals are also eligible for self-employment tax credits for days they are unable to perform services due to the same qualifying reasons employees are permitted to take paid family and sick leave.
Under the Act, employers are required to provide up to two weeks of paid sick leave, which can be used in addition to or before any PTO, for an employee that is unable to work due to:
- Sickness from Covid-19;
- A quarantine or isolation order from a doctor or local, state, or federal government;
- Providing care for a person subject to such a quarantine or isolation order; or
- Providing care for a child due to the closure of a school or childcare provider.
Such leave is required to be paid at the employee’s full rate of pay, subject to a maximum of $511 per day or $5,110 in the aggregate, for reasons (1) and (2) above, or 2/3 of the employee’s regular rate of pay for reasons (3) and (4) above, subject to a maximum of $200 per day or $2,000 in the aggregate. Employers are also required to provide paid family leave for a total of twelve weeks, the last ten weeks of which is required to be paid at 2/3 of the employee’s normal rate of pay or a maximum of $200 a day or $10,000 in the aggregate. An employee is eligible for paid family leave due to caring for a child whose school or daycare is closed due to the outbreak. Employees that take paid family leave or sick leave are protected from retaliation or discrimination due to the use of the leave. Employers are required to post a notice published by the Department of Labor which can be found here.
For employers that are maintaining operations but at reduced schedules, the Act can be viewed as an opportunity to utilize tax credits to continue to retain and pay eligible employees that are under quarantine orders or caring for children. We understand that everyone’s situation is different and encourage you to contact our attorneys on further advice and analysis on how to comply with this law and take advantage of it, if appropriate.