EFMLA, PLSA, And Tax Credits….Oh My!

Sullivan & Worcester

The second-wave of federal legislation – the Families First Coronavirus Response Act (the Act) – became law on March 18, 2020. The new law is aimed at addressing COVID-19 by making expansions to the Family and Medical Leave Act (FMLA) and by enacting a new federal Paid Sick Leave Act (PSLA). The Act provides a unique tax credit approach for employers to cover 100% of the costs resulting from these new requirements.

Emergency Family and Medical Leave Expansion Act – Division C of the Act expands both FMLA coverage and eligibility for employees on a temporary basis, beginning no later than April 2, 2020 and continuing through December 31, 2020, and in a number of ways.

First, the Act revises the current employee threshold for FMLA coverage. During this time, all employers with fewer than 500 employees are subject to the new FMLA requirements whereas previously only employers with 50 or more employees were subject to the FMLA. Exceptions to the new FMLA requirements exist for health care and emergency response workers.

Second, the Act extends FMLA eligibility to all employees after 30 days of employment. This is a marked shift from the previous requirement that an employee work for at least one year and 1,250 hours prior to eligibility.

Third, the Act provides for paid FMLA coverage to employees who are unable to work (or telework) because of a loss of child care, whether that child care was previously provided by schooling or an on-site or a paid (non-family/friend) at home provider, as a result of a public health emergency (COVID-19). The first 10 days of leave may be unpaid, although an employee may choose to take accrued vacation, personal, medical or sick leave during this period. After the first 10 days, additional leave must be paid at at least 2/3rds of the employee’s regular rate of pay and assuming normally scheduled hours, but not more than $200 per day and not more than $10,000 in the aggregate.

Finally, employers with 25 or more employees must reinstate any employee returning from the new FMLA leave to their same or equivalent position. Employers of fewer than 25 employees are exempted from the reinstatement requirement if the following conditions are met:  (1) the employee’s position no longer exists due to an economic downturn or other circumstances caused by a public health emergency during the period of Emergency FMLA; and (2) the employer makes reasonable efforts to return the employee to an equivalent position for up to a year following the employee’s return from leave.

As noted, the new requirements become effective no later than April 2, 2020 and generally sunset as of December 31, 2020.

Emergency Paid Sick Leave Act – Division E of the Act, which provides for two weeks of paid sick leave for employees, generally applies to employers with fewer than 500 employees and is available to all employees, regardless of the length of employment.

Under this new law, employees in the following categories are eligible for the benefit:

  1. Subject to a Federal, state or local quarantine or isolation order related to COVID–19.
  2. Advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  3. Experiencing symptoms of COVID–19 and seeking a medical diagnosis.

For employees in the preceding categories, sick leave is paid at the employee’s regular rate of pay (unless the Federal, state or local minimum wage is higher), but not more than $511 per day and $5,110 in the aggregate.

  4. Caring for an individual who is described in (1) or (2) above.
  5. Caring for a child if the school or childcare site is closed or child care is not available, due to COVID–19 precautions.
  6. Any other substantially similar condition to the preceding as specified by HHS.

For employees receiving leave under (4), (5) or (6), the amount payable is 2/3rds of the employee’s regular rate of pay (unless the Federal, state or local minimum wage is higher), but not more than $200 per day and $2,000 in the aggregate.

Full time employees are entitled to 80 hours of paid sick time and part time employees are entitled to paid sick time for their average working hours over a two-week period.

Employers will be required to post a PSLA notice, once a model is provided by the Department of Labor.  Violations of the PSLA are treated as a violation of the FLSA and may result in fines, imprisonment, damages and/or attorney’s fees.

Employers that are health care providers or emergency responders need not offer the new benefit and employers with less than 50 employees may not be subject to the new law if a determination is made that doing so would jeopardize the viability of the business.

Employers may not discriminate against employees who take the new paid sick leave and the new paid sick leave is to be taken before other employer provided paid leave.

The new requirements become effective no later than April 2, 2020 and generally sunset as of December 31, 2020.

Funding through tax credits – Each of the new paid FMLA and PLSA laws are funded by the Federal government through a tax credit system. This includes not only the paid leave benefit but also includes an amount equal to the cost of the employer’s qualified health care expenses (amounts paid for group health coverage) allocable to the paid leave.  Division G of the Act governs how this aspect of the law is to work.

An employer is able to claim a credit against their quarterly payroll tax liability for up to 100% of the qualified sick leave wages paid, subject to the various applicable per day and per individual limits, plus the group health coverage cost.  According to recently published guidance, employers will be able to take the extraordinary action of retaining withheld income and Social Security taxes (employee and employer share) in an amount equal to the liability.  If the potential credit is greater than the withholding liability, an employer will be able to apply for a refund.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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