In light of the disruption caused by the Coronavirus pandemic, lawmakers passed legislation containing provisions pertaining to paid leave and corresponding tax credits. Below is a summary of these provisions.
Emergency Paid Sick Leave
Beginning April 2, 2020, an employer of fewer than 500 employees must provide to each full-time employee the equivalent of two (2) weeks (80 hours) of “paid sick leave” to the extent that the employee is unable to work (or telework) because:
(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
(3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
(4) The employee is caring for an individual who is subject to an order as described in paragraph (1) above or has been advised as described in paragraph (2) above.
(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions.
(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
“Paid sick leave” is:
- the lesser of the employee’s regular rate of pay or $511 per day (for a total of $5,110 per employee) for leave because of a situation described in paragraph (1), (2) or (3) above or
- the lesser of two-thirds (2/3) of the employee’s regular rate of pay or $200 per day (for a total of $2,000 per employee) for a situation described in paragraph (4), (5) or (6) above.
For part-time employees with varied schedules, the employer must use the average number of hours that the employee was scheduled per day over the 6-month period ending on the date on which the employee takes the paid sick leave, including hours for which the employee took leave of any type. Presumably, similar rules will apply with respect to employees with varied compensation rates, such as the formula compensation.
Employers may not require an employee to use other paid leave before such employee may use his or her paid sick leave. Paid sick leave may be used only once and expires on December 31, 2020. There is no requirement that an employee is paid unused leave on any separation of employment.
Additional Child Care Leave
Employers of fewer than 500 employees must also provide an additional ten (10) weeks paid leave for employees who request leave for a situation described in paragraph (5) above. The rate of pay for this additional leave is the same as for the first two weeks, namely the lesser of two-thirds (2/3) of the employee’s regular rate of pay or $200 per day (for a potential additional $10,000 total).
Payroll Credit for Paid Sick Leave
Employers are supposed to get prompt refundable payroll tax credits for any paid sick leave. These credits are equal to 100 percent of the qualified sick leave wages paid by the employer, plus the amount of the employer’s health plan expenses attributable to the employee for the period of such leave (subject to the $511 and $200 caps noted above).
Employers are entitled to credit the amount paid for this paid sick leave against amounts that would otherwise have to be deposited with the IRS for employer FICA (OASDI) taxes respect to this and other compensation. If there are not sufficient employer OASDI taxes to cover the cost of this paid sick leave, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. In addition to this, , the IRS has indicated that it intends to permit employers to credit the amount paid for this paid sick leave against all amounts that would otherwise have to be deposited with the IRS for withheld federal income taxes and employer and employee FICA taxes with respect to all employees of the employer.
Opt-Out and Exemptions
Employers of employees who are health care providers may elect out of these rules for the health care providers that they employ. In addition, the Secretary of Labor may promulgate regulations that exempt small businesses (generally, those with fewer than 50 employees) from these requirements.
This summary does not constitute as legal advice. If you have questions about how these provisions affect you and your business, you should consult legal counsel.