Coronavirus Response Act

ALERT: President signs Families First Coronavirus Response Act

March 20, 2020

Act includes important provisions designed to aid the economy, support individual financial stability and curb the spread of COVID-19.

On Wednesday, March 18, President Donald Trump signed into law H.R. 6201. This alert summarizes three aspects that affect employers: Emergency Family and Medical Leave Expansion Act, Emergency Paid Sick Leave Act, and Tax Credits for Paid Sick and Paid Family and Medical Leave Act.

Private businesses with 500 or more employees are not covered by this legislation.

Emergency Family and Medical Leave Expansion Act

First, the Families First Coronavirus Response Act includes changes to the Family and Medical Leave Act of 1993 (FMLA).

The Emergency FMLA Expansion Act provides that private-sector employers with fewer than 500 employees, and covered public-sector employers, must provide up to 12 weeks of job-protected FMLA leave for “a qualifying need related to a public health emergency” to employees who have been on the payroll for at least 30 calendar days prior to the request for qualified leave.

This “qualifying need” is limited to circumstances where an employee is unable to work or telework due to a need to care for a son or daughter under 18 years of age if the child’s school or place of childcare has been closed or is unavailable due to a public health emergency.

The first 10 days of emergency FMLA leave can be unpaid. Employees can substitute accrued vacation, personal or sick leave, but an employer may not require them to do so.

The remainder of FMLA leave is required to be paid, at no less than two-thirds of the employee’s regular rate, for the number of hours the employee would otherwise be scheduled to work. The provisions limit the amount of required pay for leave to no more than $200 per day and $10,000 in the aggregate per employee.

FMLA leave, including this expansion, generally requires the employer to restore employees to their prior positions (or an equivalent) upon return from FMLA leave.

The Act includes an exception to this requirement for employers with fewer than 25 employees, if the employee’s position no longer exists following the qualified leave due to economic conditions or operational changes (e.g., a dramatic downturn in business) caused by a public health emergency, subject to certain conditions.

The legislation authorizes the Secretary of Labor to issue regulations to exempt small businesses (defined as those with fewer than 50 employees) if the required leave would jeopardize the viability of their business.

An employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application of the provisions in the amendments of this Act.

The provisions take effect no later than April 2nd and expire December 31, 2020.

Emergency Paid Sick Leave Act

In addition to the FMLA expansion, H.R. 6201 contains a provision requiring paid sick leave. In general, a full-time employee is entitled to 80 hours of paid sick leave, pro-rated for part-time employees, based upon their average two-week work expectancy. Unlike the 30-day payroll requirement for FMLA expansion, employees are immediately eligible for this leave.

The Act requires private employers with fewer than 500 employees, and covered public employers, to provide paid sick time to an employee who is unable to work or telework for the following reasons:

  1. the employee is subject to a federal, state or local quarantine/isolation order related to COVID-19;
  2. the employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns;
  3. the employee is experiencing COVID-19 symptoms and seeking a medical diagnosis;
  4. the employee is caring for an individual who is under a governmental quarantine or healthcare provider isolation order;
  5. the employee is caring for a son or daughter whose school or place of childcare is closed due to COVID-19 precautions; or
  6. the employee is experiencing any other substantially similar conditions as specified by the Secretary of Health and Human Services and other government officials.

The paid sick time shall not exceed the following amounts based on the employee’s circumstances:

Reason for leave Amount not to exceed
Leave is taken for reasons (1), (2), or (3) noted above: $511 per day ($5,110 in the aggregate) where leave is taken when the employee is subject to quarantine, isolation or is seeking medical treatment for COVID-19 (reasons (1), (2) or (3) noted above); calculated using the greater of the employee’s regular rate of pay or the minimum wage established by the FLSA or the state or locality in which the employee is employed.
Leave is taken for reasons (4), (5) or (6) noted above: $200 per day ($2,000 in the aggregate) where leave is taken for caring for others or school closures (reasons (4), (5) or (6) noted above); calculated at two-thirds the employee’s required compensation as described above for reasons (1), (2) and (3).

The Act also indicates the following:

  • The employer may not require an employee to use other paid leave before the employee uses this paid sick leave.
  • This paid sick leave shall not carry over to any other years.
  • A prohibition on retaliating against any employee who takes leave in accordance with the new law.
  • That the failure to pay required sick leave will be treated as a failure to pay minimum wages in violation of the Fair Labor Standards Act and be subject to penalties.

The provisions take effect no later than April 2nd and expire on December 31, 2020.

Tax Credits for Paid Sick and Paid Family and Medical Leave Act

The legislation also provides a payroll tax credit for employers that are required to offer Emergency FMLA or paid sick leave, including self-employed individuals.

Credit for Paid Sick Leave

  • Employers will be allowed a payroll tax credit for 100% of qualified sick leave wages paid by the employer.
  • The wages taken into account for this credit are those wages which are authorized under the Emergency Paid Sick Leave Act, described above. In addition, the amount of wages eligible for credit for any individual shall not exceed $511 per day and $200 per day respectively, as indicated above. There are some overall limits that apply related to how many days can be taken into account for the credit.
  • If the amount of the credit for any calendar quarter exceeds the payroll tax liability for the quarter, the excess shall be refunded.
  • Employers will also receive an increased credit for the amount of the employer’s qualified health plan expenses (for example, expenses paid or incurred to provide and maintain a group health plan) as are allocable to the qualified sick leave wages.

Credit for Paid Family Leave

  • Employers are also entitled to a payroll tax credit for wages that are paid due to the Emergency Family and Medical Leave Act.
  • The wages taken into account for this credit for any individual shall not exceed $200 per day or $10,000 for all calendar quarters.
  • If the amount of the credit for any calendar quarter exceeds the payroll tax liability for the quarter, the excess shall be refunded.
  • Employers will also receive an increased credit for the amount of the employer’s qualified health plan expenses (for example, expenses paid or incurred to provide and maintain a group health plan) as are allocable to the qualified family leave wages.

The wages paid for emergency sick leave and family and medical leave under this legislation are taxable wages for income and employment tax purposes, except that such wages are exempt from the employer's portion of Social Security tax. Such payments are subject to Medicare taxes but an additional payroll tax credit is allowed for the amount of Medicare tax paid on those wages. Accordingly, hours and wages paid for these two situations should be tracked and reported separately.

Other legislative efforts

H.R. 6201 is the second emergency measure from Congress in response to the coronavirus. H.R. 6074 was enacted on March 6 and focused on supplemental appropriations to various federal agencies to ramp up preparedness and response efforts. A third piece of legislation is reportedly underway that will focus on industry-specific financial relief. The bill is expected to include tax and other measures to increase cash flow to businesses in industries such as travel, lodging, restaurants and retail that have been rapidly and dramatically impacted by the spread of COVID-19.

Changing landscape and for more information

As you know, the landscape changes daily during this unprecedented public health emergency. We will continue to provide pertinent updates to you during this time.

As a reminder, the above is only a summary review of the Families First Coronavirus Response Act. There are also provisions in the law regarding funding for various federal agencies, as well as other provisions relating to the response to this public health crisis. Please contact your AGH tax advisor, Tax Executive Vice President Shawn Sullivan, Senior HR Consultant Carrie Cox or Outsourcing Senior Vice President Cindy McSwain using the contact information included below to discuss your situation or employer-related questions.

Shawn Sullivan

Executive Vice President
Tax Services

Shawn serves as one of two primary leaders in the firm’s large tax group. He has extensive public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, wholesale/retail distribution, real estate development and management, construction, and contractor industries. In addition to enhancing business performance to minimize tax consequences, he has experience in mergers and acquisitions and international tax and business structuring.

A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.

Carrie Cox

Senior Consultant
Org. Development & Family Business Services

Carrie has experience in a variety of human resource functions, including labor laws, compensation structures, employee classification, benefits administration, performance management and human resource best practices. She has served clients in a number of industries, including manufacturing, construction, banking and not-for-profits. Carrie is a member of the national and local chapters of the Society of Human Resource Professionals (SHRM) and serves on the Wichita chapter board of directors.

She is a certified practitioner for the Myers-Briggs Type Indicator® and the Hay Group’s Emotional and Social Competency Inventory. Her additional certifications include Professional in Human Resources (PHR) from the Human Resource Certification Institute and SHRM-CP designated by the SHRM.

Cindy McSwain

Senior Vice President
Outsourcing Services

Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to joining the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned organizations.

Her current clients cross many industry sectors, including manufacturing and distribution, restaurants, retailers, medical and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.

Information in this document has been obtained by Allen, Gibbs & Houlik, L.C. from sources believed to be reliable. However, AGH does not guarantee the accuracy nor completeness of any information. This communication does not and is not intended to provide legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, AGH assumes no liability whatsoever in connection with its use. Nothing in this communication can be used to avoid penalties that may be imposed by a governmental taxing authority or agency.

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