Leave Provisions in the Families First Coronavirus Response Act

March 24, 2020

Key takeaways for businesses navigating these new rules:

  • Employees are guaranteed two weeks of paid sick leave and ten weeks of paid family and medical leave.
  • Employers will be reimbursed for 100% of the cost of employee leave.
  • Small businesses under 50 employees can apply for exemptions.

The Families First Coronavirus Response Act was signed into law on Wednesday, March 18th. The Act primarily outlines new paid family and sick leave provisions for employees, and it provides reimbursement to employers whose employees use the leave options. The Joint Committee on Taxation estimates that the Act will reduce federal revenue by $104.9 billion. While this post will focus primarily on the leave provisions, the Act also expands and modifies unemployment benefits, expands nutrition programs, guarantees free coronavirus tests for the uninsured, and expands other medical programs like Medicaid. The IRS issued a news release outlining the new provisions and procedures. The Republican leaders of the House Transportation and Infrastructure Committee also put out a useful guide of actions taken by federal infrastructure agencies.

The Act provides paid leave to all employees of companies under 500 employees, including those who are self-employed. There are two types of leave provided under the Act: “sick leave” and “family and medical leave.” Sick leave applies to employees who are experiencing symptoms of coronavirus or are in self-quarantine due to a diagnosis of coronavirus or contact with someone diagnosed with coronavirus. The employee receives 2/3 of their regular pay, and the employer is reimbursed for up to $511 per day or $5,110 in total. For employees taking sick leave to care for someone with coronavirus, the employer can be reimbursed up to $200 per day and $2,000 in total. Employees can also take a ten-week paid family and medical leave at 2/3 of their regular pay. This is intended for employees who must care for a child whose school or child care facility is closed. The employer’s reimbursement is capped at $200 per day or $10,000 in total.

The employer “reimbursement” will effectively be deducted from the employer’s tax payments to the IRS. For example, if an employer normally deducts $10,000 from their employees’ paychecks for federal taxes, and paid leave costs add up to $8,000 in the same pay period, the employer would only pay the IRS $2,000 in that period. The amount should be deducted from the employer’s total payment of federal income, Social Security, and Medicare taxes. If those taxes are collectively less than the cost of paid leave, the employer will be able to file with the IRS for an additional reimbursement, which the employer will receive in two weeks or less. The IRS says that it will announce the procedure for this reimbursement this week. Employers will also be reimbursed for health insurance costs they pay while the employee is not at work.

Small businesses with fewer than 50 employees can apply for an exemption to paid leave requirements for school closings and child care only if the requirements would threaten the viability of the business. The Department of Labor says it will provide guidance on how exactly this standard will be applied, but has not released that guidance as of Monday, March 23rd. Health care providers will also be exempted from new paid leave requirements, and the Department of Labor will issue a rule to that affect.

The Department of Labor will not be bringing any enforcement actions against businesses for a 30-day period so long as businesses act “reasonably and in good faith to comply with the Act.” All of the leave provisions in the Act are set to expire after December 31, 2020.

O’Neill and Associates will continue monitoring rules issued by the IRS, Treasury Department, and the Department of Labor for updates to these procedures and implementation of rule requirements in the Act

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