20 Apr Families First Coronavirus Response Act: What Businesses Should Know
During this difficult time, the COVID-19 pandemic is having unprecedented impacts on businesses across the nation. Signed by President Trump on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) is designed to provide assistance to struggling employers and employees. It is effective April 1, 2020 through December 31, 2020.
The full legislative package includes a wide range of provisions, including budget allocations for free coronavirus testing, food assistance and medical services. In addition, the law contains broad changes to paid sick, family and medical leave, along with the expansion of unemployment insurance, that apply primarily to businesses.
Emergency Family and Medical Leave Expansion Act
The first section of the FFCRA applying to businesses pertains to an expansion of the U.S. Family and Medical Leave Act (FMLA). Under this provision, paid FMLA is available to any employee who has been employed for at least 30 days and must care for children whose schools have closed due to the coronavirus health emergency. The eligible employee must not be able work (or work remotely) while caring for children.
Employers are first required to offer employees unpaid leave (or accrued paid leave or paid vacation) for 10 days. After this, paid leave activates and employees are compensated at two-thirds of their regular rate. Paid leave cannot exceed $200 per day and $10,000 total for the full 10 weeks.
Employers are eligible for two refundable payroll tax credits that will reimburse them for the full amount paid to employees for qualified leave. In addition, businesses with fewer than 50 employees may be exempt from all of these requirements if they can prove that providing the leave would risk their company going out of business.
Paid Sick Leave
The FFCRA also establishes a federal emergency paid leave benefits program to provide payments to some employees. It requires employers with fewer than 500 employees to provide two weeks’ worth of paid sick leave if employees are 1) unable to work because they are subject to quarantine or isolation, 2) are experiencing symptoms of COVID–19, 3) are caring for someone who is in quarantine or isolation and/or 4) have children in schools that have closed.
Full-time employees can receive up to 80 hours of paid sick leave, while part-time employees can receive pay based on the number of hours they would work during an average two-week period. Emergency paid sick leave is offered in addition to any existing sick leave and/or paid time off that is already offered by an employer.
An employee who is unable to work due to their own health circumstances is entitled to 80 hours of paid sick leave at their regular rate of pay, up to $511 per day with a cap of $5,110. An employee who takes leave to care for others is entitled to 80 hours of paid sick leave at two-thirds their regular rate of pay, up to $200 per day and capped at $2,000.
Businesses with fewer than 50 employees may be exempt from all of these provisions if providing the leave could jeopardize the viability of their business. Healthcare and emergency response organizations may exclude employees from paid FMLA expansion due to the coronavirus crisis.
Tax Credits for FMLA and Paid Sick Leave
To help employers afford the new paid sick leave and paid FMLA benefits, companies are able to seek reimbursement through tax credits each quarter. The tax credits are applied against an employer’s already-owed Social Security taxes. However, if that offset is not enough to cover these payouts to employees, then the Treasury Department is authorized to help cover the rest with cash payouts.
In addition, the Treasury Department is directed to issue regulations to waive penalties for businesses not submitting their payroll taxes if they do so in anticipation of a refund under the new law. Additionally, an employer’s tax credit is increased by the amount the employer pays to maintain health care related to new sick leave and FMLA benefits. This will allow a company to maintain health care benefits while the employee is on leave.
It is important to maintain appropriate documentation in order to qualify for the tax credits. Your company must retain documentation demonstrating the amount of paid sick leave wages paid to each employee and how that amount was calculated, as well as copies of all completed Forms 7200 and Forms 941 submitted to the Internal Revenue Service.
Finally, the FFCRA boosts unemployment benefits, with nearly $1 billion in state grants to cover processing and paying unemployment insurance. It also raises the amount of assistance to states with high unemployment for those who have exhausted benefits already.
The FFCRA also eliminates the need for employees to wait a week before they are eligible for unemployment insurance and eases work search requirements, meaning employees will be able to apply for unemployment insurance more quickly.
Clearly, the coronavirus pandemic has caused businesses to operate through a period of great hardship and uncertainty. Understanding the provisions of the FFCRA will help businesses make effective decisions, especially when considering possible staff reductions.