(Update to Mar. 19 Post Summary of the Families First Coronavirus Response Act)
As discussed in our Employment Law Alert on March 19, 2020, the Families First Coronavirus Response Act (the “Act”) became law on March 18, 2020. https://morningstarlawgroup.com/insights/coronavirus-covid-19-alert-emergency-national-paid-leave-law/
Divisions C and E of the Act require that employers with fewer than 500 employees (with some exceptions) provide eligible employees Public Health Emergency Leave and Emergency Sick Leave for qualifying reasons related to COVID-19. These paid leave provisions have created considerable concern among employers regarding their financial ability to provide paid leave to employees in this time when business revenues may be substantially reduced as a result of the COVID-19 situation.
On Friday March 20, 2020, U.S. Department of the Treasury (“Treasury”), Internal Revenue Service (“IRS”), and U.S. Department of Labor (“DOL”) announced a series of regulations designed to make the Act’s paid leave provisions less burdensome for small businesses: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
The Secretary of the Treasury has not announced an effective date for the Act. By its language, the Act is to become effective within 15 days after the President’s signature, on a date determined by the Secretary of the Treasury. Therefore, we expect it to become effective not later than April 2, 2020.
Here are the highlights of the announced regulations:
- Exemptions for Employers with Fewer Than 50 Employees. Division C of the Act, the Emergency Family and Medical Leave Expansion Act (“EFMLA”) requires employers with fewer than 500 employees to provide up to 12 weeks of leave, which is paid at a rate of two-thirds the employee’s regular rate of pay after the first 10 days of leave, when the employee is unable to work due to a need to care for a son or daughter under 18 whose school or place of care has closed due to COVID-19. Division E of the Act, the Emergency Paid Sick Leave Act (“EPSLA”), requires the employer to provide up to 80 hours (two workweeks) of paid leave at the employee’s regular rate of pay for qualifying reasons related to COVID-19. However, both the EFMLA and the EPSLA grant the DOL the authority to issue regulations to exempt small businesses with fewer than 50 employees from these requirements when the imposition of such requirements would jeopardize the viability of the business. The DOL has announced that it will forthwith issue “simple and clear criteria” for business to apply for these exemptions.
- 30-Day Non-Enforcement Period. DOL will issue regulations to provide for a 30-day non-enforcement period for employers to come into compliance with the Act. During this period, DOL will not bring any enforcement action against employers for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act.
- Immediate Tax Credits. When employers pay employees, they normally must withhold and deposit with the IRS federal income taxes, Social Security, and Medicare. Under the announced IRS regulations, eligible employers who pay qualifying sick or childcare leave under the Act may retain payroll taxes, including federal income tax, Social Security, and Medicare, equal to the amount of qualifying sick and childcare leave paid to their employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS.
The announced regulations are expected to be issued the week of March 23, 2020. We will provide further details regarding these regulations once they are issued.
Because the COVID-19 pandemic is a fluid situation, and because risks can be presented in a myriad of ways, it is important to analyze each situation on a case-by-case basis, to determine the appropriate course of action.
If you need help with your planning or working through scenarios that present themselves in your workplace, we are here to help. For assistance, please contact Morningstar Law Group Associate Attorney Hank Gates (email@example.com or 919.590.0393) Morningstar Law Group Partner, Amie Flowers Carmack, (firstname.lastname@example.org or 919.590.0394).