Families First Coronavirus Response Act (“HR-6201”)  

Congress recently passed a significant piece of bipartisan legislation which is commonly referred to as the Families First Coronavirus Response Act (“HR-6201”).  The bill was subsequently signed by the President on March 18, 2020, and is effective as of April 2, 2020 through December 31, 2020.  Although the bill was passed with the noble intent of providing aid to families nationwide, it can be detrimental for small businesses and other employers who must balance these new obligations while simultaneously complying with local stay in place orders and business closures.  This article will address some of the key parts of the bill which employers need to know prior to the effective date. 

Generally, the bill applies to employers with less than 500 employees and provides some very limited and discretionary exceptions for small businesses with less than 50 employees.  Because most employers will be subject to the bill’s requirements, it is of the utmost importance that business owners understand the ramifications of this bill in order to safeguard their business and plan for the financial future of the companies.

1. Public Health Emergency Leave

Under the Public Health Emergency Leave portion of the bill, employers with less than 500 employees are required to provide qualifying employees with up to twelve weeks of leave in the event that they are unable to work or telework because they must care for a child under the age of 18 years old due to a school closure relating to a public health emergency.  The first ten days of the required time off are unpaid but the employee can elect to substitute accrued paid time off to compensate for the loss of income during the two week period.  After the first two weeks, the employer is required to provide continued paid leave at 2/3 of the regular rate in the amount of $200 per day up to a total of $10,000 in the aggregate. 

Pay under this section of the bill is calculated by the number of hours that the employee would otherwise be normally scheduled to work.  If an employee is an hourly employee on a varying work schedule, then the employee’s leave is calculated based on their average hours worked during the preceding six month period.

The bill provides a discretionary exemption for small businesses who employ less than 50 employees when it would jeopardize the viability of the company.  Employers can apply for an exemption to the Secretary of Labor to request an exemption from this law.  Additionally, employers with less than 25 employees do not need to restore the employee to their previous position at the end of the leave if the business’s economic condition changes and reasonable efforts cannot restore an employee to an equivalent position.

2. Emergency Paid Sick Leave

Similar to the Public Health Emergency Leave section, Congress provided additional leave for certain qualifying employees.  Under the Emergency Paid Sick Leave section of the bill, employers must provide employees with two weeks of paid sick leave, which is able to be used immediately, in the event that the employee is unable to work or telework.  Qualifying employees under this section are employees who are subject to Federal, State, or local quarantine or isolation orders related to COVID-19, who have been instructed to self-quarantine by a health care provider, who experience symptoms relating to COVID-19, who are caring for an individual effected by COVID-19, or who are caring for a child whose school has been closed due to COVID-19 precautions. 

Emergency Paid Sick Leave applies to employers with less than 500 employees or more than 1 employee, subject to discretionary exemptions by the Secretary of Labor for employers who employ less than 50 employees when providing such leave would jeopardize the viability of the business.

Under this section, full time employees are entitled to 80 hours of paid sick leave and part time employees are entitled to the number of hours that the employee works in an average 2 week period.  Employers may not require an employee to use other accrued sick leave prior to the time off provided by Emergency Paid Sick Leave. 

Calculation of pay under this provision varies depending on the triggering event. For example, if the employee is out of work because they are experiencing symptoms, self quarantining, or seeking diagnosis related to COVID-19, then the employee may be paid up to $511 per day to a maximum of $5,110 in the aggregate.  In contrast, if the employee is absent due to their need to care for a child who was effected by a school closure relating to COVID-19, then the employee must be paid at $200 per day up to $2,000 in the aggregate.

Significantly, employers are also required to post a notice of the requirements and availability of sick leave under this portion of the bill within seven days from the date of enactment.  Employers should distribute this information to their workers by or before April 2, 2020 to ensure compliance with their notice requirements under the bill.

3. Non-Discrimination or Retaliation

By way of reminder, employers will be subject to civil penalties in the event that they discharge, discipline or discriminate against employees who seek to take paid sick leave or other protections afforded by the bill.  Employers should contact legal counsel to determine potential steps and remedies which they may take in order to safeguard their businesses in this abnormal time.

4. Payroll Credit – Emergency Leave

Although the bill attempts to safeguard employers by providing tax credits for costs associated with the emergency leave requirements for employees, many employers cannot afford to front the costs associated with said leave as it would cripple or bankrupt the company.  Nevertheless, employers who pay employees under the Emergency Leave sections of the bill are entitled to a refundable tax credit equal to 100% of the leave wages paid.  The credit may be taken against the employer’s Social Security taxes and should be claimed on the employer’s quarterly employment tax returns.  Employers who are concerned about short term cash flow should be able to fund employee payment under the emergency leave by assessing employment taxes which are withheld for the IRS.  In order to determine the potential tax ramifications associated with accessing this payroll credit, employers should contact their CPA.  If the credit exceeds the amount which needs to be paid under the payroll tax, the credit becomes refundable.

5. Payroll Credit – Paid Sick Leave

Similarly, Employers who make payments under the two week paid sick leave section of the bill are entitled to a refundable tax credit equal to 100% of the qualified paid sick leave wages paid to an employee in a calendar quarter. The amounts paid are capped per the statutory payments which are allotted to an employee each day.  By way of example, the amount of the tax credit per employee is capped at $511 per day for employees who contract the virus or who must otherwise self-isolate.  Like the payroll credit under the emergency leave section of the bill, employers tax credit can be allowed against the Social Security on an employer’s quarterly employment tax returns.  If the credit exceeds the amount which needs to be paid under the payroll tax, the credit becomes refundable.

6. Credit for Self-Employed and Independent Contractors

The bill provides additional tax credits for independent contractors, gig workers, and self-employed workers as it permits them to claim the tax credit against their regular income taxes as they relate to sick or family leave.  Based on the reason for the leave, the tax credit will cover either 67% of the lost income if the individual is taking care of a child who is out of school due to a COVID-19 related closure, or 100% of the income in the event that the individual is out of work by reason of contracting the virus, diagnosis, quarantine, or the like.  Additional information will be provided by the Treasury in the coming weeks as the bill requires the Treasury to provide additional documentation which guides self-employed individual through the claim process. 

Summary

In this turbulent and unique time in history, Tyler Law is ready to answer any potential questions which employers may have relating to employment, retention, paid leave, sick leave, remote work, or the employer’s obligations under this newly enacted bill.  Please do not hesitate to contact us if you have any questions as the implementation of this bill to your workplace may vary based on each employee’s unique facts and circumstances.