By Jim Paretti, Michael J. Lotito, and Sebastian T. Chilco on
March 14, 2020
In the early hours of March 14, 2020, the U.S. House of Representatives passed sweeping legislation in response to the spread of the coronavirus (COVID-19) across the United States. The Emergency Families First Coronavirus Response Act (H.R. 6201) includes a number of public health measures, but also several specific provisions relating to paid leave that are of direct interest to private employers.
It is reported that the Administration supports the bill, and the U.S. Senate is expected to vote on the measure shortly. It is unclear whether the Senate will approve the House bill as passed, reject it, or make modifications to it, which the House would then have to re-approve. It is also likely that additional response measures, perhaps including additional tax provisions, or industry-specific relief provisions, may be considered in the near future, and the House has already indicated its intent to take up a “technical corrections” bill with respect to H.R. 6201 shortly.
It is important to note that this bill is not the final word on whether, when, or how laws may change; there are many moving parts, and changes (perhaps significant ones) may come as the Senate takes up its version of this legislation. The below is provided to update employers as to where matters stand at the time of publication. Littler’s Workplace Policy Institute will continue to update as events warrant.
Select provisions in the House-passed bill that are of direct interest to employers are set out below.
Emergency Family and Medical Leave Expansion Act
This section of the bill provides employees of private employers with fewer than 500 employees with the right take up to 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA). Eligible employees must have been on the employer’s payroll for 30 days, and may use emergency FMLA leave for the following reasons:
- To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus;
- To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus; and
- To care for a child of an employee if the child’s school or place of care has been closed, or the childcare provider is unavailable, due to a coronavirus.
The first two weeks of leave may be unpaid (an employee may choose to substitute accrued vacation leave, personal leave, or other medical or sick leave during this period, but an employer may not require an employee to do so). After the two weeks of unpaid leave, employers must continue paid FMLA leave at a rate of no less than two-thirds of the employee’s usual rate of pay (assuming leave is necessary for one of the above purposes).
The Secretary of Labor has the authority to issue regulations to (a) exclude certain health care providers and emergency responders from the list of those employees eligible for leave; and (b) to exempt small businesses with fewer than 50 employees where the imposition of these requirements would jeopardize the viability of the business as a going concern.
As with traditional FMLA leave, this leave is job-protected, meaning an employer must return the employee to the same or equivalent position upon their return to work. There is an exception to this requirement for employers with fewer than 25 employees if the employee’s position does not exist after FMLA leave due to an economic downturn or other operating conditions that affect employment caused by a public health emergency during the period of leave (subject to certain conditions, including reasonable attempts to return the employee to an equivalent position, and required efforts to contact a displaced employee for up to a year after they are displaced).
The bill takes effect no later than 15 days after the date of the bill’s enactment, and is applicable for the one-year period following enactment.
Emergency Paid Sick Leave Act
This section provides that private employers with fewer than 500 employees must provide employees with two weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for coronavirus. Leave is paid at two-thirds the employee’s regular rate if taken to care for a family member for the same reasons or to care for a child whose school has closed, or childcare provider is unavailable, due to the coronavirus. Full-time employees are entitled to 80 hours of leave, and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.
The bill ensures employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave.
The bill includes anti-retaliation protections, and generally provides for remedies in line with Fair Labor Standards Act penalties for failure to pay minimum wages.
Paid sick time under this section does not carry over from year to year, and these requirements of the bill expire on December 31, 2020.
Emergency Unemployment Insurance Stabilization and Access Act
Another section provides $1 billion in 2020 for emergency grants to states for activities related to processing and paying unemployment insurance (UI) benefits, under certain conditions. Five hundred million is allocated to provide immediate additional funding to all states for staffing, technology, systems, and other administrative costs, so long as they meet the following basic requirements about ensuring access to earned benefits for eligible workers:
- Require employers to provide notification of potential UI eligibility to laid-off workers
- Ensure that workers have at least two ways (for example, online and phone) to apply for benefits
- Notify applicants when an application is received and being processed and if the application cannot be processed, provide information to the applicant about how to ensure successful processing.
Another five hundred million would be reserved for emergency grants to states that experienced at least a 10 percent increase in unemployment. Those states would be eligible to receive an additional grant, in the same amount as the initial grant, to assist with costs related to the unemployment spike, and would also be required to take steps to temporarily ease eligibility requirements that are limiting access to UI during the COVID-19 outbreak, like work search requirements, required waiting periods, and requirements to increase employer UI taxes if they have high layoff rates.
Tax Credits for Emergency Paid Sick Leave and Family and Medical Leave
The portion of the bill provides for a series of refundable tax credits for employers providing paid emergency slick leave or paid FMLA, including tax relief for self-employed individuals. Specifically, the bill as passed by the House provides for:
- A refundable tax credit for employers equal to 100 percent of qualified paid sick leave wages required to be paid by the Emergency Paid Sick Leave Act that are paid by an employer for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes).
- A refundable tax credit for self-employed individuals equal to 100 percent of a qualified sick leave equivalent amount for eligible self-employed individuals who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation with respect to coronavirus. For eligible self-employed individuals caring for a family member or for a child whose school or place of care has been closed due to coronavirus, the section provides a refundable tax credit equal to 67 percent of a qualified sick leave equivalent amount.
- A refundable tax credit for employers equal to 100 percent of qualified family leave wages required to be paid by the Emergency Family and Medical Leave Expansion Act that are paid by an employer for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) (the employer portion of Social Security taxes). The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer.
- A refundable tax credit equal to 100 percent of a qualified family leave equivalent amount for eligible self-employed individuals. The credit is allowed against income taxes and is refundable. Eligible self-employed individuals are individuals who would be entitled to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act if the individual was the employee of an employer (i.e., not self-employed). The qualified family leave equivalent amount is capped at the lesser $200 per day or the average daily self-employment income for the taxable year per day.
The House bill leaves many questions unanswered, and technical corrections to the bill are expected to be proposed and considered shortly. For example, the enforcement mechanism against employers that are required to provide emergency FMLA leave but have less than 50 employees is not entirely clear. Nor is there any guidance as to how employers will be expected to apply these new federal requirements in states with existing state or local paid leave requirements. Congress may also provide additional direction to the Department of Labor or other agencies as to how they may address these issues via regulation.
We will continue to update the status of these changes as they continue to rapidly evolve.
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This article only includes general information and IMS is not, by means of this article, rendering any tax, legal or other professional services. This communication should not be relied upon for any decision or action that may have an impact on your business. Prior to taking any action, you should be in contact with your advisor.