Sick/Leave Rules & Tax Credits

April 3, 2020Lisa

The Families First Coronavirus Response Act (FFCRA), signed into law on March 18, 2020, requires most employers with fewer than 500 employees to provide paid Emergency Sick and/or Family/Medical leave for specific reasons related to COVID-19. The Act is effective for wages earned from April 1, 2020 thru December 31, 2020, and is not retroactive. This paid leave is 100% reimbursed to the employer through payroll tax credits.

When a payroll is processed with FFRCA leave wages, the federal payroll tax deposit due will be reduced by the amount of gross wages, employer Medicare tax, and any employer health insurance premiums applicable to the time the employee was on leave. (No employer FICA tax is withheld on FFCRA wages.) In cases where the wages paid are more than the total payroll tax due, employers can fax IRS Form 7200 to request an advance payment of the credit. (This same form may be used to request prepayment of Employee Retention credits associated with the CARES Act.) AccuPay will assist you in determining whether a Form 7200 should be filed.

There are some excellent resources online detailing the specifics of FFCRA, specifically the Department of Labor website at https://www.dol.gov/agencies/whd/pandemic. Be sure to check out the Questions and Answers section of the DOL website if you have any specific questions. (Hint: Use Control + F on your keyboard to search by keyword. There are lots of FAQ’s!)

Summary of the FFCRA

The FFCRA is broken down into two types of paid emergency leave – Sick Leave and Family/Medical Leave. The amount of wages that are paid and reimbursed under the Act depend upon the type of leave and reasons for taking it.

Emergency Sick Leave

Employers are required to pay up to 2 weeks of sick leave, at 100% of the employee’s regular rate of pay (capped at 80 hrs; $511/day; $5,111/period), to any employee who cannot work or “telework” because:

The employee is diagnosed with COVID-19
The employee has been ordered by a government entity and/or healthcare professional to self-isolate/quarantine (While not specifically addressed in FFCRA, this is not believed to include “shelter in place” orders for the general population of a state/county, etc.)
The employee is experiencing symptoms of COVID-19 and is waiting for a diagnosis

The Paid Sick Leave mandate also includes the requirement for employers to pay up to 2 weeks of sick leave at 2/3 the employee’s regular rate of pay (capped at 80 hours; $200/day; $2,000/period), to any employee who cannot work or “telework” because:

The employee is caring for an “individual” who has been ordered by a government entity and/or healthcare professional to quarantine (mandate does not specify this must be a family member)
The employee is caring for his/her child (under 18) whose school/daycare is closed due to COVID-19
The employee is experiencing a “substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor” – As of this writing there has been no clear definition of what this means, so use with caution.

(Note: Emergency Sick leave does not count toward the employee’s 12 weeks of FMLA leave in a 12-month period.)

Emergency Family/Medical Leave

The second portion of the FFCRA allows up to 10 weeks of paid Family and Medical Leave for employees caring for their children whose schools/child care providers are closed due to COVID-19. This is paid at 2/3 the employee’s regular rate of pay for a maximum per day of $200 with a cap of $10,000 for the 10-week period. (This paid leave technically starts after 10-days, which prevents overlap with the paid Sick Leave provision described above.)

If the employer is subject to FMLA, the 10 weeks allowed under FFCRA (plus the 10-day waiting period which may be covered under the Sick Leave provision) are part of the 12 workweeks of FMLA leave allowed in a 12-month period. (The FFCRA amends the FMLA to include this reason for leave.) Employers may pro-rate the FFCRA leave based on time already used under FMLA during the 12-month period. Employers may not, however, prorate FFCRA Family and Medical leave based on any paid sick leave previously taken by the employee as part of a company’s paid time off policy. (See DOL Q&A for more information)

Employers with less than 50 employees may be exempt from providing leave to employees related to child care/school closing IF allowing the leave would have a negative impact on the business. As of this writing, the Department of Labor has not provided guidelines for documenting this, but both the IRS and DOL report the exemption in their FAQ’s. No exemption is listed for employees who are sick, quarantined, or caring for someone who is. This is because these employees should be at home away from co-workers regardless of the employer’s size!

WHAT SHOULD I DO NOW?

If you are an employer with less than 500 employees, there are a few actions steps you can take now to prepare you in the event one of your employee’s requests FFCRA leave.

Print out and post the required “Employee Rights” poster from the Department of Labor. This should be posted in a prominent place, such as near your other labor posters.
If you haven’t already, determine whether employees are able to work from home if one of the FFCRA “trigger events” occurs. Wages paid under FFCRA assume that the employee is not able to work or “telework.” Keep in mind all FLSA/Wage and Hour laws apply to “telework.”
If you have less than 50 employees, and your business would be negatively impacted by allowing leave for child care reasons, write-up documentation attesting to this. This way you can give the same explanation to any employee who requests leave, and have a head start once the DOL provides final guidance on the exemption.
If you have more than 50 employees and are subject to FMLA, make sure your records are up to date so you will know which employees may not be eligible for the Family Leave portion of the mandate.

DO’S AND DON’TS WHEN AN EMPLOYEE QUALIFIES FOR FFCRA

DO:

Notify AccuPay ASAP so we can set up the appropriate earning codes. Let your AccuPay Payroll Specialist know what type of leave is being paid and to whom. (See DOL Fact Sheet) Be sure to separate any regular hours paid in the pay period from FFCRA leave hours, so our software will accurately calculate your payroll tax credit. Be sure to let us know of any employer health insurance amounts applicable to the employee(s) on leave. (See link in item 3)
Collect the following information and hold onto it for a period of 4 years:
1. The employee’s name
2. Date or dates of leave
3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason
  1. For illness/quarantine – record name of government entity or healthcare provider who advised quarantine or provided diagnosis. If not the employee who is quarantined, provide name and relation to employee.
  2. For child care/school closing: Record the name of the school (attach website posting, etc. of closure); Document name and age of child(ren) with signed statement by employee that no one else is available for childcare. If child is over 14 and leave is during daylight hours, must also include statement of special circumstances that require the employee to provide care.
4. A statement that the employee is unable to work, including telework, for reason above
Keep documentation of how all FFCRA hours, wages, and health insurance costs were calculated. See IRS’s instructions for calculating eligible health insurance amounts.
Consider allowing partial days of work and partial days of leave to assist employees with child care, etc. Intermittent leave is allowed through FFCRA. Any increment is allowed within the time and wage caps of the FFCRA. The FFCRA says both parties must agree, so get it In writing! If you go with this option – Please be sure to let your processor know which hours are “regular” work and which hours are FFCRA leave so that employees are paid at the correct rate, and you receive the tax credits due. (Also keep in mind that no one who is sick or quarantined should ever come into the workplace. Any intermittent sick leave applies to telework only.)

DON’T:

Don’t wait to notify your Payroll Specialist. Our system will need to be set-up on a client by client basis to correctly handle these payments, so please give us as much lead time as possible.
Don’t require your employee to first take vacation or PTO. This is not allowed under FFCRA.
Don’t pay FFCRA leave time to your employees if your business is temporarily closed, or you have already laid off the employee due to COVID-19. These employees should instead apply for unemployment benefits. (Also see our PayDay’s regarding the CARES Act for more options.)