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On March 20, 2020, the U.S. Treasury Department, Internal Revenue Service (IRS), and U.S. Department of Labor (Labor) 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 their employees. 1 This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
Paid Sick Leave for Workers
For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable.
Employers receive 100% reimbursement for paid leave pursuant to the Act.
Health insurance costs are also 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.
Small Business Protection
Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide paid leave to care for a child whose school is closed or child care is unavailable, if the viability of the employer’s business is threatened.
Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
To take immediate advantage of the paid leave credits, employers can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
The Act provides paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers can claim these credits based on qualifying paid leave they provide between the Act’s effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.
The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay.
Paid Sick Leave Credit
For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit based on the cost to maintain health insurance coverage for the eligible employee during the leave period.
Child Care Leave Credit
In addition to the sick leave credit, if an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers can receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit based on the cost to maintain health insurance coverage for the eligible employee during the leave period.
Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees (including employees who are not receiving paid leave under the Act).
If payroll taxes are less than the cost of qualified sick and child care leave paid, employers can file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small Business Exemption
Employers with fewer than 50 employees can request an exemption from the Act’s paid leave requirements relating to school closings or child care unavailability if the requirements would jeopardize the ability of the business to continue. The exemption will be based on simple and clear criteria regarding circumstances that jeopardieze the viability of an employer’s business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
Labor is issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violating the Act so long as the employer acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
For More Information
For more information about these credits and other relief, visit https://www.irs.gov/coronavirus. For additional information about adapting your employment policies and practices to meet the challenges of the COVID-19 pandemic, please contact John Conley at email@example.com.
On March 20, 2020, Governor Doug Ducey issued an executive order increasing access to unemployment benefits for those facing financial hardship because of COVID-19. 1 These resources will be applied retroactively to hardships experienced after March 11, 2020. The Arizona Department of Economic Security will begin accepting benefits applications March 23, 2020.
Unemployment insurance benefits may be available to individuals who are involuntarily unemployed as a result of COVID-19. The amount of the benefit will vary based upon the amount of money that the individual has previously earned, but will be between $187 and $240 per week.
Governor Ducey’s executive order regarding COVID-19 unemployment benefits:
The executive order is welcome relief to both employees and employers alike. Employers will have greater ability to manage reduced staffing needs through these challenging and fluid circumstances, while employees receive some financial assistance in the form of unemployment insurance benefits. You can learn more at www.AZUI.gov.
For additional information about adapting your employment policies and practices to meet the challenges of the COVID-19 pandemic, please contact John Conley at firstname.lastname@example.org.
On Wednesday, March 18, 2020, President Trump signed into law H.R. 6201, otherwise known as the “Families First Coronavirus Response Act” (FFCRA). The legislation is intended to provide relief for individuals who have been affected by the COVID-19 (Coronavirus) outbreak. The support includes paid sick leave benefits and paid protected family leave for employees of certain businesses.
Below is a summary of key provisions impacting employers.
EMERGENCY PAID SICK LEAVE
Which employers are required to provide paid sick leave benefits?
The law applies to private sector employers with fewer than 500 employees as well as government entities. Certain exceptions may apply (see below).
When can an employee use paid sick leave and how much paid sick leave is required?
Paid sick leave is available to employees who are unable to work (or telework) because of the following:
Full-time employees are entitled to 80 hours of immediately-available paid sick leave. Part-time employees are entitled to paid sick leave in an amount that is equivalent to their normal work hours in a two-week period.
What is an employee’s rate of pay when taking paid sick leave under the FFCRA?
In cases in which employees are using paid sick leave to care for themselves, they must be paid their normal rate of pay or minimum wage – whichever is greater. In cases in which employees use paid sick leave to care for others, they are entitled to two-thirds of the foregoing rate.
With respect to self-care, paid sick leave is capped at $511/day and $5,110 in the aggregate.
Paid sick leave to care for others is capped at $200/day and $2,000 in the aggregate.
Self-employed workers are also eligible for reimbursable tax credits.
Can an employer require an employee to use vacation time or other paid time off before using paid sick leave?
No. The law prohibits employers from requiring an employee to use vacation or other paid time off before using paid sick leave.
The law states that paid sick leave cannot diminish the rights of an employee under any other law or existing employer policy.
Can an employer require an employee to find a replacement to cover a shift or schedule?
Are there any exceptions to the paid sick leave requirements?
The Department of Labor is authorized to exempt businesses with fewer than 50 employees when the imposition of paid sick leave requirements would jeopardize the “viability of the business.”
Employers of healthcare workers and/or emergency responders may exclude those employees from paid sick leave provisions.
Are employers required to provide notice to employees of their rights to paid sick leave?
Yes. Employers are required to post a notice in a conspicuous location in the workplace. The Department of Labor will make a model notice available by March 25, 2020.
Are there consequences for employers who fail to meet paid sick leave requirements?
Employers may not discriminate or otherwise take adverse action against employees who use or request use of paid sick leave.
Employers who fail to abide by paid sick leave requirements may be subject to significant civil penalties and fines.
EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT
What is the difference between emergency leave and the traditional leave provided under the FMLA?
The emergency leave provided under the FFCRA amends the FMLA to provide job-protected leave for a public health emergency related to COVID-19.
Employers should note the key differences between emergency leave and traditional FMLA leave: 1) employers with less than 50 employees are required to provide emergency leave; 2) emergency leave removes the 12-month/1,250-hour employee qualification requirement; 3) emergency leave is paid after the first ten days.
Which employers are required to provide emergency leave to employees?
As is the case regarding paid sick leave, the law applies to private sector employees with fewer than 500 employees and government entities. Certain exceptions may apply (see below).
When can an employee use emergency leave and how much emergency leave is required?
Eligible employees may use emergency leave when they are unable to work (or telework) because they need to care for a minor child whose school/daycare is closed or because the child’s childcare provider is unavailable due to the COVID-19 outbreak.
Eligible employees are entitled to up to 12 weeks of emergency leave.
Who is an eligible employee?
Any full-time or part-time employee who has been on the job for at least 30 days.
Are employers required to pay employees who use emergency leave?
An employer is permitted to designate the first ten days of emergency leave as unpaid (although an employee can opt to use vacation time or other paid time off for those days).
Beyond the first ten days, emergency leave is paid at two-thirds of the employee’s normal rate of pay with a cap of $200/day and $10,000 in the aggregate.
Are employees who use emergency leave entitled to the same position upon return?
Employers must return employees to the same or equivalent position upon their return to work.
An exception to this requirement may apply to employers with fewer than 25 employees when the employee’s position does not exist after the emergency leave period due to changes in the employer’s operating conditions (e.g., dramatic economic downturn) caused by COVID-19.
Are there any exceptions to emergency leave requirements?
The Department of Labor is authorized to exempt businesses with fewer than 50 employees when the imposition of emergency leave requirements would jeopardize the “viability of the business.”
Employers of healthcare workers and/or emergency responders may exclude those employees from emergency leave provisions.
When does the law become effective?
The law takes effect on April 2, 2020 and is designated to expire on December 31, 2020.
What if businesses cannot afford to provide paid sick leave or emergency leave?
Subject to certain caps and limits, the FFCRA provides refundable tax credits to employers to cover wages paid to employees who take paid sick leave or emergency leave.
Eligible businesses may be able to receive an exemption if they can show that the paid sick leave and emergency leave requirements jeopardize the viability of their businesses.
The attorneys at Milligan Lawless will continue to update employers on various workplace issues arising from the rapidly-developing COVID-19 public health emergency.
If you have any questions regarding how the FFCRA’s paid sick leave or emergency leave requirements affect your workplace, please contact John Conley at (602) 792-3535 or Kylie Mote at (602) 792-3523.