UPDATED February 2021: The IRS released updated FAQs to cover how the COVID-19 stimulus bill, extends the availability of the tax credits created by the FFCRA to eligible employers for paid sick and family leave provided through March 31, 2021, as well as other amendments to the credits.
UPDATED December 30, 2020 – The President signed the COVID-19 stimulus bill into law on December 27, 2020, confirming that FFCRA leave will end on December 31, 2020, though covered employers may continue to provide paid leave that would have otherwise been mandated under the FFCRA voluntarily and claim a tax credit to cover the costs of the paid leave provided through March 31, 2021. For more information please visit our blog post.
UPDATED August 14, 2020 – On August 3, 2020, the U.S. District Court for the Southern District of New York vacated several significant provisions of the U.S. Department of Labor’s “Final Rule” interpreting the FFCRA. It is unclear whether the decision to vacate portions of the Final Rule will apply only to the state of New York or on a nationwide basis and therefore, employers should consult legal counsel regarding any uncertainty. For more information please visit our blog post.
On March 18, 2020, Congress passed (and the President signed into law) the Families First Coronavirus Response Act (the Act) requiring employers with less than 500 employees to provide family and paid sick leave related to the Coronavirus (COVID-19) outbreak to eligible employees. The law is set to take effect April 1, 2020 and is set expire on December 31, 2020.
In addition to various support and protection programs to help those impacted by the virus, the Act provides the following benefits regarding paid family and sick leave:
- Employees are entitled to at least 80 hours of paid sick leave for qualifying reasons related to COVID-19;
- Up to 12 weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) for a “qualifying need related to a public health emergency;”
- Free COVID-19 testing for all group health plans;
- Relief to employers who are now required to provide paid leave through a federal tax credit.
Which employers does the Act’s paid family and sick leave provisions apply to?
The Act applies to employers with less than 500 employees. An employer has fewer than 500 employees if, at the time an employee’s leave is to be taken, the employer employs fewer than 500 full-time and part-time employees within the United States (which includes the District of Columbia, or U.S. Territory).
In making this determination, employers must include employees on leave; temporary employees who are jointly employed by employer and another employer (regardless of which entity is maintaining the jointly-employed employees payroll); and day laborers supplied by a temporary agency (regardless of whether the employer is the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold. The DOL guidance has also suggested that whether a subsidiary employer should count its parent organization’s employees toward the threshold depends on circumstances surrounding the joint employer relationship. If the parent organization is considered a joint employer under the FLSA or an integrated employer under the FMLA, then the subsidiary employer should count the parent organization’s employees toward the 500-employee threshold.
Please note that the above is a fact-intensive analysis and employers should consult with employment counsel as soon as possible if they have questions about whether or not they are covered.
What is the Effective Date of the Act?
The Act’s provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.
The following summarizes the paid sick and family medical leave provisions of the Act:
1. Emergency Paid Sick Leave to All Employees, Regardless of Tenure
The Act requires employers with less than 500 employees, and public employers of any size, to provide emergency paid sick time to any employee, regardless of the length of their employment, for a qualifying emergency related to the coronavirus.
Covered employers must provide the following to employees who are unable to work (or telework) for qualifying COVID-19 reasons:
- Full-time employees: Up to 80 hours (10 days) of paid sick time.
- Part time employees: Paid sick time equal to the number of hours that the employee works, on average, over a two-week period. The DOL has clarified that if the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, the employer may use a six-month average to calculate the employee’s average daily hours and that part-time employee may take Emergency Paid Sick leave for their average number of hours per day for up to a two-week period (and if applicable, may also take Emergency FMLA for the same number of hours per day up to ten weeks after that). (See DOL FAQ, Question 5)
What are the Qualifying Reasons for Emergency Paid Sick Leave Under the Act?
The Act outlines the following qualifying reasons and associated paid sick leave benefits (as it relates to COVID-19) when an employee is unable to work or telework:
- Employee subject to a Federal, State, or local quarantine or isolation order;
- Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
- Employee has been advised by a health care provider to self-quarantine due to concerns;
- Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
- The employee is experiencing symptoms of the virus and seeking medical diagnosis;
- Paid at 100% and capped at $511 per day ($5,110 in the aggregate).
- The employee is caring for an individual who is subject to, or advised by a healthcare provider to self-quarantine;
- If assisting an individual who must quarantine, the employee is paid at 2/3 of their pay rate and capped at $200 per day ($2,000 in the aggregate).
- The employee is caring for a child if the school, place of care, or childcare provider, is closed or unavailable due to COVID-19 precautions;
- If caring for a child due to school/childcare closure, the employee is paid at 2/3 of their pay rate and capped at $200 per day ($2,000 in the aggregate).
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary or the Treasure and Secretary of Labor.
- The employee is paid at 2/3 of their pay rate and capped at $200 per day and $2,000 in the aggregate.
Employees cannot carry-over COVID-19-related paid sick leave to any following year and are not entitled to payment for any unused COVID-19-related paid sick leave upon termination of employment. Notably, as discussed below, the Act was designed so that the amount of wages that employers are required to pay will not exceed the tax credit that is made available under the Act.
On March 27, 2020, Congress passed the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act, that aims to aid workers and businesses impacted by the economic hardship caused by the COVID-19 pandemic. The CARES Act revised this Act by adding that employers providing Emergency Sick Leave will not be required to pay more than either:
- $511 per day ($5,110 in total) to employees for reasons (1), (2), or (3) above OR
- $200 per day ($2,000 in total) for each employee for reasons (4), (5), and (6).
For more information about the CARES Act, please visit our blog post.
What Does it Mean to Be Unable to Work, or Telework for COVID-19 Related Reasons?
The DOL has clarified that an employee is able to telework when the employer permits or allows an employee to perform work while at home or at a location other than their normal workplace. Telework is work for which normal wages must be paid and is not compensated under the paid leave provisions of the Act. (See DOL FAQ, Question 17).
An employee is unable to work (or telework) if an employer has work available and one of the COVID-19 reasons set forth under the Act prevents the employee from being able to perform that work, either under normal circumstances at their normal worksite or by means of telework. If it is agreed that an employee will work their normal number of hours, but outside of their normally scheduled hours (for instance early in the morning or late at night), then an employee is able to work and leave is not necessary under the Act unless a COVID-19 qualifying reason prevents them from working that schedule. (See DOL FAQ, Question 18)
*On August 3, 2020, the U.S. District Court for the Southern District of New York vacated several significant provisions of the U.S. Department of Labor’s “Final Rule” interpreting the FFCRA, including the “work availability requirement”. For more information please visit our blog post.
Can Employers Require Employees to Use Other Paid Leave?
The Act prohibits an employer from requiring an employee to use other paid leave available prior to using emergency paid sick leave under the Act. The DOL has also clarified that an employer cannot deny an employee Emergency Paid Sick Leave under the Act if the employer previously provided paid leave for a reason identified in the Act prior to the Act going into effect. (See DOL FAQ, Question 11). The Act also prohibits an employer from requiring as a condition of providing paid sick leave under the Act that an employee search for or find a replacement employee to cover the hours during which the employee is using paid sick leave.
Does Taking Emergency Paid Sick Leave Count Against Other Paid Sick Leave Under State/Local Law, or Employer’s policy?
No. Paid sick leave under the Act is in addition to other leave provided under Federal, State, or local law; an applicable collective bargaining agreement; or an employer’s existing company policy. (See DOL FAQ, Question 46)
Can Employees Take Emergency Paid Sick Leave Intermittently While Teleworking?
Generally yes, if an employee is unable to telework their normal schedule of hours due to one of the qualifying reasons in the Act, an employer may agree to permit that an employee take paid sick leave intermittently while teleworking. (See DOL FAQ, Question 20).
If an employee is still working at a work site (i.e., is not teleworking) and needs paid sick leave for reasons #1-4, or #6 above (i.e., any qualifying reason other than reason #5, when leave is needed due to school/ child care closure), Emergency Paid Sick leave must be taken in full-day increments only until the reason for leave ends or the employee has exhausted their entitlement.
2. Emergency Family and Medical Leave (Emergency FMLA) Available for COVID-19 Related Reasons
The Act amends the federal FMLA to require employers with less than 500 employees to provide leave for “a qualifying need related to a public health emergency” to certain eligible employees through the end of the year (December 31, 2020). The Act does not change the FMLA’s health benefit provisions.
Who is Eligible for this Leave?
Any full-time or part-time employee that has worked for the employer for at least 30 calendar days. It is important to note that the eligibility for emergency FMLA under the Act is different from the general FMLA eligibility requirements, which requires employees to be employed for one year, have worked for 1,250 hours, and to be working in a location where there are 50 or more employees within a 75-mile radius.
For the purpose of the 30 calendar day count, if an individual was working for a company as a temporary employee, and the company subsequently hires them on a full-time basis, an employee may count any days previously worked as a temporary employee toward this 30-day eligibility period. (See DOL FAQ, Question 14)
What Leave Must be Provided?
Employers must provide eligible employees with up to 12 weeks of Emergency FMLA leave for a “qualifying need related to a public health emergency.” The Act describes “qualifying need related to a public health emergency” as an employee unable to work (or telework) to care for a child (under the age of 18) due to school or childcare closures as a result of a public health emergency. “Public health emergency” is defined by the Act as an emergency with respect to COVID-19 declared by a Federal, State, or local authority.
The Act provides that the first two weeks of the Emergency FMLA leave can be unpaid, while the following 10 weeks must be paid. The Act also provides that an employee may use emergency paid sick leave available under the Act for the first 10 days or use other paid leave otherwise available from the employer.
At what Rate are 10 weeks of Emergency FMLA paid?
The employer must pay 2/3 of the employee’s regular pay rate, up to $200 per day (and up to $10,000 total), for the number of hours the employee would otherwise be scheduled to work. Employers may be able to claim a tax credit for the amounts paid to employees. The Act was designed so that the amount of wages employers are required to pay will not exceed the tax credit that is made available under the Act. The available employer tax credits are discussed further below.
Is all Leave under the FMLA Now Paid Leave?
No. The only type of family and medical leave that is paid leave is the Emergency FMLA leave under the Act when such leave exceeds ten days. This includes only leave taken because the employee must care for a child whose school or place of care is closed, or childcare provider is unavailable, due to COVID-19 related reasons. (See DOL FAQ, Question 12)
Can Employees Take Emergency FMLA Leave Intermittently While Teleworking?
Yes, if an employee is prevented from teleworking their normal schedule of hours because they need to care for their child whose school or place of care is closed, or child care provider is unavailable, because of COVID-19 related reasons, an employer may permit that the employee take Emergency FMLA Leave intermittently while teleworking. (See DOL FAQ, Question 20)
**On August 3, 2020, the U.S. District Court for the Southern District of New York vacated several significant provisions of the U.S. Department of Labor’s “Final Rule” interpreting the FFCRA, including the requirement of employer consent for intermittent leave. For more information please visit our blog post.
Are there any Exceptions to the Emergency FMLA Requirements?
The Act provides an exception to the job restoration requirements that are generally required under Emergency FMLA for employers with less than 25 employees, if certain requirements are met. Job restoration will not be required for employees returning from Emergency FMLA if their position “does not exist due to an economic downturn or other changes in operating conditions of the employer” and “are caused by a public health emergency during the period of leave.” In order to invoke this exception under the Act, the employer must:
- Make reasonable attempts to return the employee to an equivalent position with equivalent benefits, pay, and terms and conditions; and
- Make reasonable efforts to contact the displaced employee for up to a year if an equivalent position becomes available.
Do Employees Qualify for Emergency FMLA Leave for a COVID-19 Related Reason if they Have Previously Used some or all of their Leave Under the FMLA?
Employees may take a total of 12 workweeks of leave during a 12-month period under the FMLA, including the Emergency FMLA available under the Act.
If an employer was covered by the FMLA prior to April 1, 2020, eligibility for Emergency FMLA depends on how much leave an employee has previously taken during the 12-month period that the employer uses for FMLA leave. If an employee has taken some, but not all, of the 12 workweeks available under FMLA during the current 12-month period they may take the remaining portion of leave available. If an employee has already taken 12 workweeks of FMLA leave during this 12-month period, they may not take additional Emergency FMLA leave. (See DOL FAQ, Question 44-45)
Are Rehired Employees Eligible for Emergency FMLA Under the Act?
The CARES Act makes an employee who was laid off on March 1, 2020 or later, and subsequently rehired by the same employer, eligible for Emergency FMLA paid leave, so long as the employee was employed for at least 30 of the last 60 calendar days prior to layoff. This means that certain rehired employees will be able to access paid leave under the FMLA immediately upon rehire (thus eliminating the 30-day waiting period for these rehired employees). However it is important to note that Emergency FMLA leave under the Act expires on December 31, 2020, so an employee rehired after this date will not be entitled to this leave.
3. Leave Under the Act in the Event of Worksite Closure, Furlough, or Reduced Scheduled Hours
The DOL has clarified that leave under the Act is not available to employees in the following circumstances:
Worksite Closure
If the worksite closes, employees do not receive or continue to receive leave under the Act. This includes situations when closures occur:
- Prior to or after April 1, 2020 when the law takes effect;
- After an employee requests leave under the Act;
- While an employee is on leave under the Act;
- For a short period of time.
All of the above is true whether the employer closes a worksite for lack of business or because it was required to close pursuant to a Federal, State, or local directive. In all circumstances above, the employee may be eligible for unemployment insurance benefits.
Furlough
If an employer furloughs an employee because of lack of enough work or business, the employee is not entitled to then take paid sick leave or expanded family and medical leave. However, the employee may be eligible for unemployment insurance benefits.
Reduction in hours
If an employer reduces work hours because it does not have work for an employee to perform, an employee may not use paid sick leave or expanded family and medical leave for the hours that they are no longer scheduled to work. The DOL reasons that in this circumstance an employee is not prevented from working those hours due to a COVID-19 qualifying reason, even if the reduction in hours was somehow related to COVID-19. An employee may, however, take paid sick leave or expanded family and medical leave if a COVID-19 qualifying reason prevents you from working their full schedule.
(See DOL FAQ, Questions 23-28)
*On August 3, 2020, the U.S. District Court for the Southern District of New York vacated several significant provisions of the U.S. Department of Labor’s “Final Rule” interpreting the FFCRA, including the “work availability requirement”. For more information please visit our blog post.
4. Employer Notice Requirement Under the Act
What are the Notice Requirements?
Employers are required to post a notice informing employees of their right to COVID-19-related paid sick leave and family medical leave under the Act in a conspicuous place. An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website. The Secretary of Labor released a model poster and FAQs on the posting requirement. Employers are not required to post this notice in other languages, however, the DOL working on making translated versions available.
Are Employers Required to Provide Notice to Applicants, Recently Laid Off Individuals or New Hires?
The DOL has clarified that the requirements under the Act apply only to current employees and therefore, employers are not required to provide the notice to recently laid-off individuals or prospective employees.
Employers are required to provide this notice to new hires, either by email, direct mail, or by posting this notice on the premises or on an employee information internal or external website.
When Must Employers Post the Notice?
Employers must post the notice by April 1, 2020.
For additional information specific to the notice requirement, please review the DOL’s Families First Coronavirus Response Act Notice – FAQs.
5. Recordkeeping
What Records Must Employers Keep When an Employee Takes Emergency Paid Sick Leave?
If an employee takes paid sick leave under the Act, an employer should retain appropriate documentation in their records and consult Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit. Employers are not required to provide leave if materials sufficient to support the applicable tax credit have not been provided.
(See DOL FAQ, Question 15).
What Records Must Employers Keep When an Employee Takes Emergency FMLA?
If an employee takes Emergency FMLA under the Act, the employer must require their employee to provide appropriate documentation in support of the reason for the leave, just as the employer would for conventional FMLA leave requests. The DOL provides the following examples: a notice that has been posted on a government, school, or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care, or childcare provider. This requirement also applies when the first two weeks of unpaid leave run concurrently with paid sick leave taken for the same reason.
Employers intending to claim a tax credit for the expanded family and medical leave under the Act, should retain this documentation in their records and should consult the Internal Revenue Service (IRS) applicable forms, instructions, and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.
(See DOL FAQ, Questions 15-16)
Do the Existing FMLA Certification Requirements Remain in Effect?
All existing certification requirements under the FMLA remain in effect if an employee takes leave for one of the existing qualifying reasons under the FMLA. For example, if an employee is taking leave beyond the two weeks of emergency paid sick leave because the medical condition for COVID-19-related reasons rises to the level of a serious health condition, employees must continue to provide medical certifications under the FMLA if required by the employer. (See DOL FAQ, Question 16) For additional information on FMLA certifications, please see our prior blog post.
6. Interaction with Preexisting Leave Programs
Can an Employee use their Preexisting Leave Entitlements under the Employer’s Policy and Leave available under the Act Concurrently for the Same Hours?
No. If an employee is eligible to take Emergency Paid Sick Leave or Emergency FMLA under the Act, as well as paid leave that is already provided by the employer, the employee must choose one type of leave to take (unless the employer agrees otherwise). An employee may not simultaneously take both, unless the employer agrees to allow the employee to supplement the amount they receive from paid sick leave or expanded family and medical leave under the Act, up to the employee’s normal earnings, with preexisting leave.
The DOL has provided the following example: if an employee is receiving 2/3 of normal earnings from paid sick leave or expanded family and medical leave under the Act and the employer permits, an employee may use their preexisting employer-provided paid leave to get the additional 1/3 of normal earnings so that the employee receives full normal earnings for each hour.
(See DOL FAQ, Question 31)
Can the employer supplement or adjust the pay mandated under the Act with paid leave that the employee may have under a paid leave policy?
If an employee chooses to use existing leave, yes; otherwise, no. Emergency Paid Sick Leave and Emergency FMLA is in addition to an employees’ preexisting leave entitlements. Under the Act, the employee may choose to use existing paid vacation, personal, medical, or sick leave from the employer’s paid leave policy to supplement the amount they receive under the Act, up to the employee’s normal earnings.
Employers are not required to permit an employee to use existing paid leave to supplement the amount the employee receives from Emergency Paid Sick Leave or Emergency FMLA and should note that employers may not claim, and will not receive tax credit, for such supplemental amounts in excess of the Act’s statutory limits.
(See DOL FAQ, Questions 31- 34)
7. Interaction with Existing Group Health Benefit Coverage
According to the DOL, existing FMLA standards apply to Emergency FMLA meaning that employees can continue group health coverage on the same terms (including family coverage) and employees must generally continue to make regular contributions for their own portion of premiums.
The DOL states that an employer must also continue health coverage when an employee takes Emergency Paid Sick Leave. The Health Insurance Portability and Accountability Act (HIPAA) rules provide that both eligibility and premiums must be treated the same whether an individual is actively at work or absent from work due to a health factor. (See DOL FAQ, Question 30)
Employees are entitled to group health coverage during their paid sick leave on the same terms under the employer-provided group health coverage as if they continued to work. Therefore, the requirements for eligibility, including any requirement to complete a waiting period, would apply in the same way as if the employee continued to work. (See DOL FAQ, Question 51)
8. Small Business Exemption
The Secretary of Labor is authorized to issue regulations exempting businesses with less than 50 employees from the Emergency Paid Sick Leave and Emergency FMLA requirements when the imposition of the requirements would “jeopardize the viability of the business as a going concern.” According to the DOL FAQ, a small business is exempt from mandated Emergency Paid Sick Leave or Emergency FMLA leave requirements only if the:
- employer employs fewer than 50 employees;
- leave is requested because the child’s school or place of care is closed, or childcare provider is unavailable, due to COVID-19 related reasons; and
- an authorized officer of the business has determined that at least one of the three conditions outlined by the DOL is satisfied (see below for details).
(See DOL FAQ, Question 59)
The DOL indicates that school closures and childcare reasons for Emergency FMLA and Paid Sick Leave (reason #5) under the Act are the ONLY reasons for which this exemption is available (if one of the conditions listed below are met). This means that employers with fewer than 50 employees are NOT exempt from providing Emergency Paid Sick Leave for the medical/family care related reasons under the Act, even if they claim this exemption.
What Conditions Must be Satisfied?
A small business may claim the exemption if an authorized officer of the business has determined that:
- The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
- There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
(See DOL FAQ, Question 58)
The DOL has stated that to elect this small business exemption, employers should document why their business with fewer than 50 employees meets the criteria set forth by the DOL. (See DOL FAQ, Question 4)
We expect that the DOL will release additional instruction and guidance on the Small Business Exemption. Employers should consult with employment counsel if they intent to invoke the Small Business Exemption
9. Penalties and Enforcement for Emergency Paid Sick Leave and Emergency FMLA
An employer who fails to provide required sick leave, or who engages in discrimination, including retaliation, faces enforcement actions under the Fair Labor Standards Act (FLSA). An enforcement action can be brought by a single employee or as a collective action, or by the US Secretary of Labor. Penalties would include payment of the unpaid wages plus an equal amount as liquidated damages, equitable relief (such as reinstatement), injunctive relief, and even criminal prosecution for willful violations. Attorney’s fees and costs can also be awarded. An employer who fails to provide proper family leave faces the enforcement provisions as described under the current FMLA provisions.
On March 24, 2020 the DOL issued Field Assistance Bulletin No. 2020-1 regarding a temporary non-enforcement period applicable to the Act. The DOL will not bring enforcement actions against any public or private employer for violations of the Act occurring within 30 days of its enactment (i.e. March 18 through April 17, 2020), provided that the employer has made reasonable, good faith efforts to comply with the Act.
10. Employer Tax Credits
The Act authorizes a refundable tax credit that employers can utilize to offset costs associated with providing benefits under the Act. The tax credit is only available to those employers required to provide benefits under the Act. On Friday, March 20, 2020, the Department of Treasury, Internal Revenue Service (IRS) and the DOL announced that employers can begin taking advantage of the refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing COVID-19 related leave to their employees (discussed further below). The IRS later issued Notice 2020-21 stating that tax credits for qualified sick leave wages and qualified family leave wages required to be paid by the Act will apply to wages paid for the period beginning on April 1, 2020, and ending on December 31, 2020. Important Update: The President signed the COVID-19 stimulus bill into law on December 27, 2020, confirming that FFCRA leave will end on December 31, 2020, though covered employers may continue to provide paid leave that would have otherwise been mandated under the FFCRA voluntarily and claim a tax credit to cover the costs of the paid leave provided through March 31, 2021. For more information please visit our blog post.
The Act provides for employer payroll tax credits as it relates to the mandated paid leave:
Emergency Paid Sick Leave Tax Credit: Employers will be able to receive the following tax credits for payments associated with emergency paid sick leave:
- for each calendar quarter, a
tax credit for the amount the employer paid for qualified paid emergency sick
leave wages, including the following:
- a tax credit of up to $511 per employee, per day, for paid leave taken by an individual for qualifying reasons; and/or
- a tax credit of $200 per employee, per day, for paid leave taken to care for an individual subject to quarantine/self-isolation or to care for a child whose school or child care provider is closed, or if the employee is experiencing any other “substantially similar condition.”
The tax credit is permitted to offset the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes) or 3221(a) (employer Medicare (FICA) taxes). 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.
Emergency FMLA Leave Tax Credit: Employers will be able to receive the following tax credits for payments associated with Emergency FMLA leaves:
- for each calendar quarter, a tax credit for the amount the employer paid for qualified family leave wages. For example, a credit of up to $200 per employee, per day, for any paid Emergency FMLA leave provided to employees. This credit is capped at an aggregate of $10,000 for all calendar quarters per employee.
The tax credit is permitted to offset the tax imposed by section 3111(a) (the employer portion of Social Security taxes) or 3221(a) (employer Medicare (FICA) taxes). 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.
Health Coverage Continuation Tax Credit: Employers who continue to provide health coverage to employees who take Emergency FMLA or Emergency Paid Sick Leave. Employers may receive a credit for the amount paid toward maintaining the health plan and for the amounts excluded from an employee’s gross income as it relates to federal income tax. This is in addition to wages paid for qualifying leave, but it cannot exceed the credit available for Emergency FMLA and Emergency Paid Sick Leave.
As always, employers should consult with tax professionals on questions related to these tax credits.
The Act empowers the IRS to expressly issue guidance implementing these changes and additional guidance is anticipated.
CARES Act Updates to Emergency Paid Sick Leave and Emergency FMLA
The CARES Act revised the original compensation limitation under this Act by providing that employers are not required to pay (as opposed to prohibited from paying) employees more than the monetary limits set forth under the Act. This change is significant because the Act now allows employers the freedom to provide additional compensation to employees taking leave above the monetary limits if they wish. It is important to note, however, that any additional compensation above the statutory limits is not eligible for a tax credit.
The CARES Act also provides for tax-credit advances to employers for Emergency Paid Sick Leave and Emergency FMLA reimbursement by creating a streamlined process where employers can request an advance of anticipated tax-credits and refunds. The IRS is expected to release additional guidance concerning this tax-credit advance process shortly.
For more information about the CARES Act, please visit our blog post.
11. Coverage of COVID-19 Testing Related Services
The Act requires most group health plans to extend coverage at no cost to plan participants and without application of any medical management requirements (such as prior authorization or utilization review) for the following services:
- Certain COVID-19 testing: specifically, in vitro diagnostic products for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 (“COVID-19 testing”) that are approved, cleared or authorized under sections 510(k), 513, 515 and 564 of the Federal Food, Drug and Cosmetic Act (FDA), and the administration of such in vitro diagnostic products. The CARES Act recently expanded the definition of covered COVID-19 testing to include tests that are approved by the FDA, tests that developers intend to request emergency authorization for under the FDA, tests that are authorized by a state, and other tests the Secretary of Health and Human Services deems appropriate;
- Items and services furnished to a plan participant during a health care visit: including in-person, telehealth, urgent care, or emergency room visits that result in an order for or administration of covered COVID-19 testing.
This new coverage requirement will be effective immediately, but will only apply to covered items and services that are provided both on or after the date of enactment and before the end of the public health emergency period declared by the secretary of the Department of Health and Human Services (HHS).
The following summarizes the Act’s mandates as it relates to COVID-19 testing:
- Private Group Health Plans: All private group health plans, regardless of employee count (including fully insured, self-insured, and grandfathered plans), must provide coverage for COVID-19 testing and the associated provider, urgent care, or emergency visit associated with the testing to plan participants without cost-sharing (including deductibles, co-payments, and coinsurance).
- Government Plans: Medicare, Medicare Advantage, Medicaid, CHIP, TRICARE, and Indian Health Service plans must waive cost-sharing for COVID-19 testing and provider, urgent care, or emergency visits associated with that testing.
- Uninsured Individuals: States will have the option to extend Medicaid eligibility to uninsured individuals for the purpose of COVID-19 testing. The Federal government will cover the cost of this extension. The National Disaster Medical System will reimburse uninsured individuals for costs associated with COVID-19 laboratory testing.
For more on the COVID-19 testing provisions, please see our blog. Please note that our compliance team continues to monitor this legislation (and any additional released guidance) closely and will update this article accordingly as we learn more.
Additional Resources:
DOL – Families First Coronavirus Response Act Notice -FAQ
DOL – COVID-19 And the American Workplace
DOL – Families First Coronavirus Response Act: Questions and Answers
DOL – Fact Sheet: Final Rule on Joint Employer Status under the Fair Labor Standards Act
DOL – The Family and Medical Leave Act
DOL – Fact Sheet #28: The Family and Medical Leave Act
DOL – Field Assistance Bulletin No. 2020-1
Congress.gov – Coronavirus, Aid, Relief, & Economic Security Act
Sequoia Blog – FMLA Focus: Certification and Re-certification for FMLA Absences
Sequoia Blog – The Coronavirus Aid, Relief and Economic Security (CARES) Act
Sequoia Blog – Waiver of Out-Of-Pocket Costs for Coronavirus Testing
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