As we all deal with disruptions to our everyday lives caused by the Coronavirus (COVID-19) outbreak, employers are facing their own unique changes and challenges. In addition to the extra decisions that business owners are making right now to respond to employee health risks, business losses, mandated closures, remote work arrangements and other operational concerns, employers are grappling with temporary changes to the Family Medical Leave Act (FMLA) and paid sick leave benefits that small and mid-size employers are now required to offer to employees affected by COVID-19.
Modifications to Family Medical Leave Act
The Families First Coronavirus Response Act was signed by President Trump on March 18, 2020. The Act includes temporary modifications to the FMLA that include expanded reasons for leave, as well as pay beyond the normal two weeks (at a reduced rate). Under the Act, normal FMLA pre-requisites and eligibility do not apply.
Employees will be covered by FMLA if they have been employed for at least 30 calendar days and “are unable to work because they need to care for their child, who is under 18 years of age, if the child’s school or place of care has been closed or their childcare provider is unavailable due to coronavirus.”
These extended FMLA benefits are available for up to 12 weeks, 10 of which will be paid at 2/3 of the individual’s average monthly earnings. (The employee is allowed to use paid time off during the initial two weeks.) The Act imposes a cap on how much pay employees can receive if they take FMLA leave to care for a child as a result of the COVID-19 pandemic. The pay is limited to $200 per day and $10,000 in the aggregate.
Emergency Paid Sick Leave Benefit
The Act also requires paid sick leave benefits up to 80 hours for full-time employees (or the equivalent of two weeks for part-time employees) to be paid by the employer to employees impacted by the COVID-19 public health emergency. Eligible employees are those who:
- are subject to a federal, state or local quarantine or isolation order related to coronavirus;
- have been advised by a health care provider to self-quarantine due to concerns related to coronavirus;
- are experiencing symptoms of coronavirus and seeking a medical diagnosis;
- are caring for an individual who is subject to a federal, state or local quarantine or isolation order related to coronavirus OR has been advised by a health care provider to self-quarantine due to concerns related to coronavirus;
- are caring for their child if the child’s school or place of care has been closed, or the childcare provider of the child is unavailable, due to coronavirus precautions; OR
- are experiencing any 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 will be provided at the 2/3 reduced rate available under FMLA and must be provided in addition to whatever benefit the employer already provides.
The Act caps the compensation employees can receive while out on paid sick leave to:
- $511 per day and $5,110 in the aggregate when the employee is subject to quarantine, has been advised to self-quarantine, or is experiencing coronavirus symptoms and is seeking medical diagnosis (reasons 1-3 above); or
- $200 per day and $2,000 in the aggregate if the employee is caring for someone who is subject to quarantine or has been advised to self-quarantine, caring for a child whose school or child care is closed or unavailable due to coronavirus, or experiencing a substantially similar condition, as specified by regulations (reasons 4-6 above).
Employer Tax Credits Available to Ease Financial Burden
Fortunately, the Act does include relief for both small and mid-size businesses to offset the financial burden.
For small businesses (fewer than 50 employees), the Labor Department has the option to exempt workers if it determines that providing paid leave “would jeopardize the viability of the business as a going concern.”
Any employer with 500 employees or less who provides FMLA or sick leave benefits under the bill is entitled to a credit against its portion of the Social Security payroll tax. The credit can be claimed on a quarterly basis, equal to 100 percent of the amount of sick leave wages paid under the bill’s sick leave and family leave programs.
The sick leave credit for each employee is limited to $511 per day for sick leave or $200 per day to care for a family member or child whose school is closed. The family leave credit for each employee is limited to $200 per day with a maximum of $10,000.
Other limitations apply, including the number of days per employee and the dates that the wages are paid. The credits are refundable to the extent they exceed the employer’s payroll tax.
Where do we go from here?
With this pandemic expected to extend into the coming weeks or months, business continuity planning is more important than ever. Forecasts are a valuable tool for making informed decisions in uncertain times. Play out cash flow scenarios and determine which inputs need to be managed to sustain a practical overhead level as production moves down due to workers not being available or weakened links in your external supply chain caused by COVID-19 disruption.
Above all else, put safety first in everything you do. This will protect not only your employees but also your business. Communicate CDC recommendations and healthy workplace best practices to your employees regularly. If possible, utilize technology like Zoom or Microsoft Teams to meet in virtual settings with your employees, vendors and clients as everyone tries to “social distance” and still fulfill their professional responsibilities.
Finally, don’t go through this alone. Business advisors like myself can answer many of your questions or steer you in the right direction when you don’t know where to begin. Planning strategically and getting it right the first time could make all the difference as your company continues to combat Coronavirus-related challenges. Please don’t hesitate to reach out to your business community as we all work through this together.
For real-time updates on the impact of COVID-19 on you and your business, please visit our Coronavirus Resources page.