Last night, President Trump signed Congress’s emergency paid sick leave and family/medical leave bill. The new law takes effect on April 2, 2020. The law went through many iterations, so it is imperative that people who have read about prior drafts from earlier this week read about the final version. Here is what employers need to know about the new law:
The law covers employers from 1-500 employees, as well as self-employed individuals. Larger employers are not covered.
Any employee who has worked for the employer for 30 or more calendar days.
Emergency Paid Sick Leave
Employers must provide employees with paid sick leave for the following circumstances:
- Ten days of paid sick leave at their regular rate of pay (capped at $511 per day and $5,110 total) for employees who are sick with COVID-19 or who must quarantine themselves due to symptoms or exposure.
- Ten days of paid leave at 2/3 of their regular rate of pay (capped at $200 per day and $2,000 total) for employees who need to care for another individual who is quarantined or sick with COVID-19, or to care for a child whose school has closed or childcare provider is unavailable due to the crisis.
Full-time employees are entitled to 80 hours of paid sick leave. Part-time employees are entitled to the number of hours they typically work in two weeks.
For employers who already provide paid sick leave, employees may first use emergency paid sick leave before using employer-provided sick leave, and employers cannot require an employee to use other PTO prior to using emergency paid sick leave.
Emergency sick leave expires on December 31, 2020 and does not carryover to future years.
Employers cannot retaliate against employees who take sick leave under the new law.
Failure to provide paid sick leave will be treated as a failure to pay wages under the FLSA.
Employers must provide 12 weeks of job-protected leave for employees who are unable to work because their child’s school is closed or their childcare provider is unavailable due to COVID-19. The other types of Family/Medical leave were removed from the bill.
The first two weeks of leave can be unpaid. Employees can use accrued paid time off during this time.
The remaining ten weeks must be paid at 2/3 of the employee’s regular rate of pay, capped at $200 per day and $10,000 total for the duration of leave.
Emergency PFML is job-protected and employees must be restored to their jobs (or a similar position) once leave ends. Employers with fewer than 25 people can get an exemption if the employee’s position no longer exists due to business downturn or other circumstances related to the COVID-19 crisis.
Tax Credits and Reimbursements
Employers can take tax credits to offset the costs of providing emergency paid sick leave and family/medical leave. Specifically, employers will be allowed to claim a credit against the employer’s portion of FICA tax (social security and Medicare) for (1) an amount equal to emergency paid sick leave wages paid, (2) an amount equal to emergency paid family and medical leave wages paid and (2) certain employer-paid health plan expenses.
If the amount of paid sick leave exceeds the employer’s FICA taxes, the IRS will treat any excess sick leave as an overpayment of FICA taxes and issue a refund or credit.
Small Business Owners and Self-Employed Individuals
The new law allows self-employed individuals, including independent contractors, to take a credit against self-employment taxes for sick leave or family/medical leave purposes. Self-employed individuals can take a tax credit for the same amounts as above:
Sick Leave (maximum 10 Days)
- 100% of annual average daily self-employment income (capped at $511 per day) if they become sick or need to quarantine; or
- 67% of annual average daily self-employment income (up to $200 per day) to care for another individual or a child whose school or childcare is closed.
Paid Family and Medical Leave (maximum 50 days)
- 67% of annual average daily self-employment income (up to $200 per day) to care for a child whose school or childcare is closed.
Considerations for Layoffs
Sadly, we know that many of our clients are considering layoffs during this time. If you need to lay off employees before April 2, the new paid sick leave and PFML law will not affect these layoffs. However, you should be clear that these are terminations, rather than “zero-hour workweeks” or furloughs – otherwise, employees may not qualify for unemployment and you may still be liable for paid sick leave and PFML.
For future layoffs, employers should consider whether paid sick leave / PFML is more advantageous than unemployment for employees who qualify. On the one hand, employers will have to pay sick leave and PFML upfront and wait to receive reimbursement from the tax credits. On the other hand, paid sick leave and PFML will be reimbursed 100% and most employees will receive more pay than they would through unemployment. Please reach out if you would like to discuss your particular situation.
As always, please feel free to contact us if you have questions about the new law or need assistance. We know these are difficult times for our clients and will do whatever we can to help.