Important Updates to the Families First Coronavirus Response Act
Since the Families First Coronavirus Response Act (the “Act”) was enacted on March 18, there has been a lot of uncertainty surrounding the law by employers and practitioners alike. We continue to analyze updated guidance and interpretations to better guide you on this taxing journey in navigating these new laws.
Below are some clarifications since our initial publication on March 20 based on current interpretations of the law.
Effective Date: Now April 1, 2020
As we previously reported in our March 25 alert, the effective date of the Act and its paid leave requirements is April 1, 2020 (rather than April 2).
Tax Credits Available to Employers
On March 20, the U.S. Treasury Department, Internal Revenue Service and the DOL announced that employers with fewer than 500 employees can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related paid leave to employees.
Some of the key takeaways include:
- Employers receive 100% reimbursement for paid leave pursuant to the Act
- Health insurance costs are included in the credit
- Employers face no payroll tax liability
- Self-employed individuals receive an equivalent credit
- Reimbursement will be quick and easy to obtain
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided
- Where a refund is owed, the IRS will send the refund as quickly as possible
We encourage you to seek counsel from your tax advisors ASAP to find out how this may impact your business, especially those businesses facing hard decisions like whether they should temporarily close or lay off employees.
Interaction with State and Local Laws
It is very important that employers remember that the Act is in addition to existing paid leave laws and policies. State and local laws are sometimes much broader in terms of coverage and eligibility. For example, the Cook County/Chicago Paid Sick Leave ordinances provide benefits to eligible employees for their own illness, medical care, illness or medical care of certain family members or other individuals, as well as if an employee’s place of business, child care facility or school has been closed due to a public health emergency. These reasons are similar to the new Act’s eligibility, but would be in addition to leave under the Act.
If your own policies allow for paid time off and sick leave, you should continue to apply your policies in addition to the Act’s requirements.
Sequencing of Leave Under the Act
The Emergency Paid Sick Leave Act provides for an initial 2 weeks of paid leave. This period thus covers the first 10 workdays of expanded family and medical leave, which are otherwise unpaid under the Emergency and Family Medical Leave Expansion Act unless the employee elects (but is not required) to use existing vacation, personal, medical or sick leave under the employer’s policy. After the first 10 workdays have elapsed, employees will then receive 2/3 of their regular rate of pay for the hours they would have been scheduled to work in the subsequent 10 weeks under the Emergency and Family Medical Leave Expansion Act.
Employees may be eligible for both types of leave, but only for a total of 12 weeks of paid leave. Please note that you can only receive the additional 10 weeks of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.
The DOL will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, the DOL will not bring an enforcement action against any employer so long as the employer has acted reasonably and in good faith to comply with the Act. The DOL will instead focus on compliance assistance during the 30-day period. This non-enforcement period is exclusive to actions brought by the DOL and does not exclude private causes of action by employees. This update is not intended and should not be construed as advice to employers not to comply with the Act during this period.
Small Business Exemption: Future Rulemaking Expected
The DOL’s recently issued guidance from March 24 states that small businesses with fewer than 50 employees will be eligible for an exemption from the Act’s leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The DOL’s guidance says that employers should document why this standard applies to them, but offers no other information about an actual exemption. The DOL indicates that detailed regulations will be issued.
The DOL has issued posters regarding Employee Rights under the Act. This poster must be posted in a conspicuous area of the workplace like other required notices. Because many workers are performing their duties remotely right now, employers may satisfy the posting requirements by emailing or direct mailing this notice to employees, or posting this notice on an employee informational internal or external website. Currently, employers are not required to post this notice in multiple languages, but the DOL is working to translate it into other languages.