COVID-19 Paid Sick Leave and Paid Family Leave Laws
Employers have 15 days after the date of enactment, or until April 2, 2020, to update their FMLA and sick leave policies to comply with the Families First Coronavirus Response Act, which includes the Emergency Family and Medical Leave Expansion Act and Emergency Paid Sick Leave Act that President Trump signed into law.
1. Who is covered by the law?
- It applies to employers with fewer than 500 employees. The law is designed to put small and medium-size employers in the same arena as large employers who already provide similar paid leave to their employees.
- The Secretary of Labor has the authority to exempt small businesses from the child-care leave requirements if the employer can prove the law would jeopardize the viability of its business.
2. What does the law require?
- Paid Sick Leave– It requires covered employers to provide up to 2 weeks of paid sick leave for employees who are unable to work or telework because they meet one of 6 conditions:
- The employee is subject to a quarantine or isolation order relating to COVID-19.
- The employee has been advised by a health care provider to self-quarantine due to COVID-19.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for someone who is quarantined or subject to an isolation order.
- The employee is caring for a child whose school or place of care has been closed, or the child care provider of such child, son or daughter, is unavailable, due to COVID-19.
- The employee is experiencing any other substantially similar condition as determined by the Secretary of Health and Human Services.
- Paid Family Leave– It requires covered employers to provide up to 10 weeks of paid family leave for employees who were employed for at least 30 days and who are unable to work or telework because they are caring for a minor child if the school or place of care for such child has been closed, or the child care provider is unavailable, due to a public health emergency like COVID-19.
- Paid Sick Leave and Paid Family Leave– Employers are prohibited from (i) requiring employees to find replacement workers to cover their time off and (ii) discharging or discriminating against employees for requesting paid leave or for filing a complaint against the employer.
3. How much is required to be paid to covered employees?
- Paid Sick Leave
- The employer is required to pay sick leave of up to ten days of sick leave at the employee’s regular rate of pay; however, paid sick leave is capped at $511 per day and $5,110 in the aggregate for the first 3 categories above.
- Under the last 3 categories above, the employer is required to pay sick leave at no less than two-thirds (2/3) of the employee’s regular rate of pay; however, sick leave is capped at $200 per day and $2,000 in the aggregate.
- Paid Family Leave– The employer is required to pay family leave for up to 10 weeks of not less than two-thirds of the employee’s regular rate of pay based on the number of hours they were scheduled to work. The amount is capped at $200/day ($10,000 max) and employees are limited to 12 weeks of paid family leave in any calendar year.
- These provisions apply to full-time employees and to part-time employees, though part-time employees are eligible for leave based on their recent work history. For paid family leave, it applies only to employees who were employed for at least 30 days.
- Employers of employees that are healthcare providers or emergency responders can elect out of the paid sick leave requirements.
4. Cost to employers
- The law is intended to be neutral for employers. The employer is required to pay sick leave and family leave to its employees, and then it recovers the cost of such leave through a refundable, dollar-for-dollar payroll tax credit. There may be some delay between the timing of the paid leave and the reimbursement through the payroll tax credits, but the logical application of these details have yet to be worked out.
- The refundable nature of the payroll credit means that employers can receive money back from the IRS if they do not have enough payroll tax liability to offset the paid leave.
- The paid leave itself is exempt from employment taxes, and if the employer continues the employee’s health insurance coverage while he/she is out on leave, then the credit is grossed up to cover this additional expense.
- The paid family leave credit is triggered only after a covered employee has taken 2 weeks of paid sick leave.
- Employers cannot receive the payroll tax credits if they are also receiving credits under the family and medical leave program established in the 2017 Tax Cuts and Jobs Act.
- Eligible self-employed individuals can receive a refundable tax credit against their self-employment tax for both paid sick leave and paid family leave. Eligible self-employed individuals include those who regularly carry on a trade or business and would be entitled to receive paid leave under the law if they were an employee. This includes independent contractors and partners in partnerships. If the sick leave is personal, then the credit is the lesser of $511 per day or the person’s average daily self-employment income. If the sick leave is to care for another person, then it is the lesser of $200 or 2/3 of their average daily self-employment income. The sick leave credit generally is available for 10 days and the family leave credit is available for up to 50 days in an amount equal to the lesser of $200 or 67% of their average daily self-employment income. Documentation requirements will apply.
5. How does the payroll credit mechanism work?
- No details are available at this time. Much more in the way of clarification, definition and logical application is needed. We are monitoring IRS guidance.
- It requires employers to pay sick leave effective April 2, 2020. No paid sick leave or paid family leave is required to be paid before that time.
- The law expires on December 31, 2020.