Updated March 28, 2020
As previously reported, the Families First Coronavirus Response Act (FFCRA) requires private employers with fewer than 500 employees (and state/local government employers regardless of size) to provide special paid emergency family and medical (FMLA) leave and paid sick leave related to COVID-19 in certain circumstances beginning on April 1, 2020, to be offset by refundable payroll tax credits. However, the Coronavirus Aid, Relief and Economic Security Act (CARES Act), passed by Congress on March 27, 2020, and expected to be signed into law by President Trump in short order, modifies FFCRA in several key ways. The following is a summary of the key changes.
Tax Credit Advances to Cover FFCRA Leave Codified
- Under FFCRA, private employers are eligible to receive dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under FFCRA, up to the applicable per diem and aggregate payment caps (i.e., on payroll tax remittances). No such credit is available to public governmental employers. (See McGuireWoods’ March 26 legal alert for details.)
- The CARES Act goes further and codifies the IRS’ March 20, 2020, guidance, noting that employers can also receive potential tax credit advances from the U.S. Treasury for both emergency paid sick leave and emergency FMLA leave.
- Any tax credit advances are capped at the same amount as provided in FFCRA with respect to tax credits, as originally enacted. For paid emergency FMLA leave, the amount of the credit is equal to 100 percent of the “qualified family leave wages” that the employer is required to pay for the applicable quarter. This dollar-for-dollar credit is capped at $200 per employee per day, up to a maximum aggregate amount for all calendar quarters of $10,000 per employee. For paid emergency sick leave, the amount of tax credit is capped at $511 per employee per day if the employee takes leave for reasons of quarantine, self-quarantine, or symptoms/diagnosis and at $200 per employee per day if the employee takes leave to care for a quarantined individual, for qualifying child care reasons, or to care for an employee’s own substantially similar condition. FFCRA also provides tax credits for self-employed individuals who would be entitled to receive emergency paid sick leave if they had been employed by a third-party employer.
- For paid emergency FMLA leave, the amount of the credit is equal to 100 percent of the “qualified family leave wages” that the employer is required to pay for the applicable quarter. This dollar-for-dollar credit is capped at $200 per employee per day, up to a maximum aggregate amount for all calendar quarters of $10,000 per employee.
- For paid emergency sick leave, the amount of tax credit is capped at $511 per employee per day if the employee takes leave for reasons of quarantine, self-quarantine, or symptoms/diagnosis and at $200 per employee per day if the employee takes leave to care for a quarantined individual, for qualifying child care reasons, or to care for an employee’s own substantially similar condition. FFCRA also provides tax credits for self-employed individuals who would be entitled to receive emergency paid sick leave if they had been employed by a third-party employer.
- The CARES Act further states that the U.S. Secretary of the Treasury will provide appropriate forms and instructions for calculation of advances.
Certain Rehired Employees Eligible for Paid FMLA Leave
- Under FFCRA, emergency paid FMLA leave is generally available to full-time and part-time employees who have been employed with a covered employer for 30 calendar days or more.
- The CARES Act modifies FFCRA’s FMLA employee coverage rule to provide that employees who were “laid off” by an employer on or after March 1, 2020, may potentially qualify for emergency paid FMLA leave if they are later rehired by the same employer. Layoff, however, is an undefined term.
- To be eligible for this exception, a rehired employee must have worked for the employer for at least 30 of the last 60 calendar days prior to layoff.
Clarification Regarding Emergency Paid Leave Caps
- The CARES Act clarifies that individual and aggregate pay, tax credit, and tax credit advance caps for emergency paid sick leave and emergency FMLA leave under FFCRA apply “for each employee.”
- The original text of FFCRA was ambiguous as to whether this limit applied on a per employee basis, or on a cumulative basis for all employees. This clarification is consistent with our and most other analysts’ original interpretation.
The full text of the CARES Act is available here.
For answers to questions or additional guidance on how this new legislation may impact your business, contact one of the authors, any of the McGuireWoods COVID-19 Response Team members or your McGuireWoods labor and employment contact.
McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues.