On March 13, 2020, President Trump declared a national emergency related to the coronavirus (COVID-19) pandemic. In an effort to mitigate the financial and economic impact on Americans, President Trump signed H.R. 6201, the Families First Coronavirus Response Act on March 18, 2020. Among other things, the bill enacted emergency paid sick leave for employees and tax credits for employers and self-employed taxpayers affected by the pandemic.
Emergency paid sick leave requires employers to provide 80 hours, or average hours over a 2-week period for hourly employees, of qualified paid sick leave or qualified paid family leave to employees who are affected. Qualified leave is in addition to any paid sick leave currently provided by employers.
Qualified sick leave is for affected employees who are unable to work due to diagnosis, preventative care, or quarantine due to coronavirus and is paid at the employee’s regular rate, up to $511 per day and $5,110 in the aggregate.
Qualified family leave is leave for affected employees due to care for another individual or family members’ diagnosis, preventative care or quarantine, or due to closure of their child’s school or daycare due to coronavirus and is paid at two-thirds the employee’s regular rate, not to exceed $200 per day and $2,000 in the aggregate.
The bill provides payroll tax credits for employers who pay qualified wages and a credit against income taxes for self-employed taxpayers.
For employers, the payroll tax credit is equal to 100 percent of qualified wages against the employer’s portion of social security and Medicare taxes. The amount of the credit is increased by the portion of the employer’s “qualified health plan expenses” that are allocable to qualified sick leave wages. Qualified health plan expenses are amounts paid or incurred by the employer to provide and maintain a group health plan if such amounts are excluded from the gross income of the employees. The credit is refundable on required wages paid if they exceed the amount the employer owes in payroll tax.
For self-employed taxpayers, the credit is equal to the number of days the self-employed person is unable to perform services multiplied by the lesser of:
- $511/day for up to 10 days for qualified sick leave or $200/day for qualified family leave or
- 100% of average daily self-employment income for qualified sick leave or 67% average daily self-employment income for qualified family leave
The bill also expands the Family and Medical Leave Act (FMLA) for covered employees to take up to 12 weeks of job-protected leave to care for their child if the child’s school or daycare is closed due to coronavirus. A covered employee is an employee who has worked at the company for at least 30 days. The first 10 days of leave may be unpaid, but after 10 days the bill mandates employers provide paid leave equal to at least two thirds of the employee’s regular pay, not to exceed $200 a day and $10,000 in the aggregate. A payroll tax credit is available to offset 100 percent of qualified wages paid under expanded FMLA requirements and is refundable if it exceeds the amount the employer owes in payroll tax on wages required to be paid. Any additional wages paid would not be subject to the employer portion of the payroll tax. A self-employed individual is also eligible for up to 50 days of expanded FMLA but must maintain documentation to establish eligibility for the credit.
All provisions are temporary, effective from April 2, 2020 to December 31, 2020, and generally apply to business with less than 500 employees. Employers with less than 50 employees may be exempt if provided by the Department of Labor. Whether the Department will grant such an exemption is currently unknown.