We released a previous Tax Alert regarding the recently passed Families First Coronavirus Response Act (“FFCRA”). Significantly, the FFCRA created a new “emergency sick leave” and expanded the paid leave provisions of the Family and Medical Leave Act (“FMLA”). Many small-to-midsize businesses must now provide additional paid leave to employees but have been granted significant tax incentives to offset that burden. Tax incentives come in the form of a refundable payroll credit taken against the employer’s share of Social Security taxes. The credit amount, generally, is the amount of wages paid for “emergency sick leave” and family leave, limited to $200 per employee per day, unless that employee is quarantined or exhibits COVID-19 symptoms in which case the limit is increased to $511 per employee per day.

The Department of Labor (“DoL”) has released a poster that employers are required to post or distribute to their employees. Further, the DoL provided guidance related to the paid leave provisions of the FFCRA in the form of a Q&A website. The overarching message from the DoL is that, whenever possible, employers and employees should collaborate to achieve flexibility. Significant items from that Q&A are as follows:


General

  • The FFCRA paid leave provisions are effective April 1, 2020 and apply to all leave taken between the effective date and Dec. 31, 2020
  • Employers must post or provide employees with the DoL poster that informs employees of their rights under FFCRA
  • Employers must continue to provide regular health coverage during paid leave
  • Employers may not require employees to use paid time off accrued under an existing employer benefit in lieu of the paid leave provided under FFCRA
  • FFCRA paid leave is in addition to any existing employer-provided paid time off
  • Employers must institute recordkeeping procedures and require proof of eligibility for FFCRA paid leave benefits from employees


Eligibility

  • Employees are not eligible for FFCRA benefits if the employer has closed the employee’s worksite (unemployment benefits should be used instead)
  • If an employee is already on paid leave, benefits are only provided until the date of the employee’s worksite closure
  • Furloughed employees are not eligible for FFCRA paid leave benefits and should utilize unemployment benefits instead
  • Whether an employer has fewer than 500 employees is determined at the time the paid leave is taken
  • When teleworking, paid leave may be used intermittently and does not have to be taken continuously; the paid leave can be taken in any time increments agreed upon by employer and employee
  • If an employee is working at their usual workplace, paid leave must be taken in full-day increments and must be taken continuously until all available paid leave is used or the employee no longer qualifies for paid leave benefits, unless the employer and employee agree otherwise
  • Regulatory guidance regarding the small business exemption for employers with fewer than 50 employees is forthcoming


Payments

  • Full-time employees can be paid for 80 hours of work over the first two weeks under the “emergency sick leave” provisions of FFCRA
  • Part-time employees can be paid for a number of hours equal to the average number of hours that the employee works over a two-week period. If an average number of normal hours cannot be determined, alternative calculation methods are provided
  • Average hours should include overtime, but paid leave attributed to overtime is not paid at a premium rate
  • Paid leave benefits are paid at the employee’s average rate (including commissions, tips and piece rates) based on the six months prior to when the paid leave is taken


If you have any questions regarding the Families First Coronavirus Response Act or its impact on your business, please contact the tax advisors at GHJ.