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Families First Coronavirus Response Act May Ail Businesses

Yesterday marked the effective date of the Families First Coronavirus Response Act (“FFCRA,” or “Act”), which requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. Administered and enforced by the Department of Labor (“DOL”), these provisions will apply through December 31, 2020. Important for small businesses in particular to know, the FFCRA applies new sick leave and other requirements to employers previously exempted due to size.

Now, even small businesses must provide emergency sick leave for those affected by coronavirus – up to eighty hours of sick leave for full-time employees through the end of the year for a “qualifying need.” (Part-time employees are eligible as well, for their typical number of hours during a two-week period). This includes employees who have been found to have coronavirus (or have been advised by a physician that they have the virus or are an exposure risk), employees who are caring for a family member who has been infected and/or may threaten exposure to others, or caring for a child whose school or daycare is closed due to coronavirus precautions.

That third category is huge. This covers a significant percentage of the adult workforce. (In fact, I am writing this post during nap time, as I am now housebound with a one-year-old and three-year-old. The three-year-old in particular does not appreciate this new development).

If sick leave pay is invoked, employers must pay employees their normal wages, with one important note: sick-leave pay is capped at $511 per day per employee for the employee’s own health-related absence, and $200 per day when it comes to caring for a family member or child.

Another important element of the Act involves the expansion of the Family and Medical Leave Act (“FMLA”) for employees who need to take longer term leave through the end of the year because of closed schools or daycare. Any employer, even those with fewer than the current FMLA threshold of 50 employees, is subject. The Secretary of Labor can exempt employers with fewer than 50 employees if complying with the law would threaten the viability of the business; however, it is unclear how this exemption would be granted or the standards applied by the DOL.  Employers with fewer than 25 employees are exempt from reinstating an employee if the employee’s position no longer exists following the leave due to operational changes caused by the public health emergency. While the first 10 days of leave are unpaid (though the employee can choose other leave to invoke), the following 10 weeks must be paid at 2/3 of the employee’s rate of pay, with family leave pay capped at $200 per day.

Employers who provide the above leave will be eligible to receive a 100% payroll tax credit for these costs. Employers may deduct up to $200 per day for employees who are taking care of others.  Because this comes from the social security contribution, any amounts in excess of the social security liability will be paid for directly by the Treasury.  The tax credit for family leave is up to $200 per day, not to exceed $10,000.  For the self-employed, these credits will be applied against the self-employment tax.

Still, the short-term effects of these new requirements will hit small businesses, particularly for those performing stalled federal government contracts. Tax credit is great, but those benefits won’t apply for some time. Meanwhile, businesses are bleeding now.

As a business that may be affected by these new developments, it’s important you educate yourself on the FFCRA and what you need to do. While there are numerous resources available on the Internet, and you’ve likely received an email or two on this, you might want to start with the DOL’s press release, which does a good job spelling out the requirements in plain language and also provides facts sheets for both employees and employers. (The DOL press release may be accessed here). Also, if you haven’t already, hold a company meeting on coronavirus issues and applicable rules – do so. By law, your employees must be informed of their rights under the FFCPA, but with all of the information and panic flying around, that fact very well could be under your radar.

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