Sick Leave during COVID-19

 In General, Tax

What Employers Need to Know about Paid Sick-Leave during this Coronavirus Pandemic

Congress has passed the Families First Coronavirus Response Act (the “Act”) – one of several laws responding to the Coronavirus outbreak. A few key items for employers:

1)  Paid sick leave is required, even for small companies. The Act specifically applies to employers with fewer than 500 employees.

2)  Employees are permitted leave under the Family Medical Leave Act (“FMLA”) as well as under a separately mandated sick leave requirement. The Act contains two separate leave requirements: first, a 12-week leave permitted under the FMLA; and second, up to 2 weeks paid sick leave.

Employees of smaller employers may now take leave under the provisions of the FMLA, including also if their child’s school or place of care has closed due to the Coronavirus. During this leave, the employer must pay at least 2/3rd wages for 10 of the 12 weeks.

The Act also provides for mandated sick-leave wages for up to 2 weeks under a broad set of situations, including an employee’s diagnosis of Coronavirus, experience of symptoms of Coronavirus, recommendation to quarantine, need to care for a family member, or need to care for a child where a school or place of care has closed.

3)  This new sick leave requirement is in addition to any policies already in place. Under the Act, Employers are required to provide this unique 2-week paid leave benefit regardless of the employer’s policies already in place. In other words, employers cannot take the position that their existing policies already meet these requirements, but must offer these benefits in addition to benefits already in place.

4)  The Act provides a tax credit to (help) offset employers’ costs. Importantly, the Act provides a dollar-for-dollar credit against payroll taxes (i.e., FICA taxes) for employers required to provide leave wages under this Act. A few key points about this credit:

  • The credit applies to payroll taxes, so employers with historic losses or no net income may still reduce their tax burden even if they owe no income taxes.
  • However, this credit is capped at $200 per day of leave ($511 in certain cases).
  • This credit is refundable, so employers that pay leave-wages in excess of their payroll tax liability may receive a payment (but subject to the per-day caps, above).

5)  The Act includes a notice requirement. The Act requires that employers post a conspicuous notice about these rights and requirements for employees. The US Department of Labor is required to develop a form for general use within seven days of the Act’s effectiveness.

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