By John D. Walch
The Families First Coronavirus Act (H.R. 6201) is the Congressional response to the economic consequences caused by the novel coronavirus disease (COVID-19) outbreak. It requires certain employers to offer additional FMLA and sick leave (some of it paid) and provides tax credits to eligible employers providing the required leave. The act also affects employer-sponsored health plans. Here are some of the new benefit provisions:
• Family and medical leave. The act requires private employers with fewer than 500 employees and all governmental employers to provide 12 weeks of “public health emergency leave” to certain employees through Dec. 31. The emergency leave generally is available to any employee employed for at least 30 days that is unable to work (including telework) due to the need to care for a child under age 18 because a school or child care facility has closed, or a child care provider is unavailable, due to an emergency with respect to COVID-19 that is declared by a federal, state or local authority. If a parent is at home to take care of a child who is not in school or daycare because of a coronavirus emergency, and the parent is able to work remotely from home, the parent will apparently not be entitled to the leave. We foresee conflicting opinions about an employee’s ability to telework under those circumstances.
The first 10 days of such leave may be unpaid but any additional leave must be paid, based on an amount not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work, not to exceed $200 per day and $10,000 in the aggregate. Certain exemptions and special rules apply, and a tax credit may be available to help offset the cost of the paid leave (see below).
• Emergency paid sick leave. Private employers with fewer than 500 employees, and all public employers, must provide at least 80 hours of paid sick leave to full-time employees who are unable to work (or telework) for specified virus-related reasons. However, health care providers and emergency responders are exempt, and the DOL can issue regulations exempting certain businesses with fewer than 50 employees.
Part-time employees are entitled to proportionate sick leave based on their average hours worked over a two-week period. This leave is available regardless of the employee’s length of employment. Employees who are 1. Subject to a quarantine or isolation order, 2. Advised by a healthcare provider to self-quarantine, or 3. Experiencing symptoms and actively seeking diagnosis; must be paid at their regular rate, up to a maximum of $511 per day ($5,110 total). Employees caring for an individual described in 1, 2 or 3; caring for a minor child whose school is closed or child care provider is unavailable; or experiencing a “substantially similar condition” specified by regulation, must receive at least two-thirds of their regular pay, up to a maximum of $200 per day ($2,000 total). Employers cannot require employees to find a replacement worker or use other sick leave before this emergency sick leave. The sick leave mandate expires Dec. 31.
• Employer tax credits. The act provides tax credits to employers to cover wages paid to employees while they are taking paid time off described above. The credits have three components:
1. The credit for paid sick leave is equal to the lesser of the employee’s amount of leave pay or either 1. $511 per day while the employee is receiving paid sick leave to care for themselves, or 2. $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters. The FMLA credit for each employee is the amount of his leave pay limited to $200 per day with a maximum of $10,000.
2. The amount of the credits is increased by the portion of the employer’s “qualified health plan expenses” that are properly allocable to qualified sick leave wages or qualified family and medical leave wages. Qualified health plan expenses means amounts paid by the employer to maintain a group health plan, but only to the extent that such amounts are excluded from the gross income of employees.
3. In addition, the credits allowed to employers for wages paid under the sick leave and FMLA leave rules are increased by the amount of the tax imposed by the 1.45 percent hospital insurance portion of FICA on qualified sick leave wages or qualified family leave wages.
The credits are refundable to the extent they exceed the employer’s payroll tax. However, employers don’t receive the credit if they are also receiving the pre-existing credit for paid family and medical leave.
• Employer FICA exclusion. Wages paid under the sick leave and FMLA rules are not considered wages under the OASDI portion of FICA (6.2 percent).
• Comparable credits for self-employed individuals. The act also provides for similar refundable credits against the self-employment tax. It covers 100 percent of a self-employed individual’s sick-leave amount, or 67 percent of the individual’s sick-leave amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing for up to 10 days. The sick-leave amount is the lesser of average daily self-employment income or either 1. $511/day to care for the self-employed individual or, 2. $200/day to care for a sick family member or child following a school closing.
Self-employed individuals can also receive a credit for as many as 50 days multiplied by the lesser of $200 or 67 percent of their average self-employment income.
• Requirements for group health plans. Group health plans must cover without any cost sharing, prior authorization or other medical management requirements:
—Any FDA-approved products used to test for COVID-19, and
— Items and services furnished during visits to a healthcare facility (including telehealth), urgent care center or emergency room that result in COVID-19 testing.
These provisions are effective April 1 and expire Dec. 31. The DOL has provided a model notice that employer can use to satisfy the act’s notice requirement. In FAQ guidance, they also allow the notice to be emailed to employees or posted on an intranet.
John D. Walch is a member of the Durham Jones & Pinegar’s Business and Finance section. His practice focuses primarily on issues relating to benefit plans.