EFMLA, PSLA, And Tax Credits….Oh My!

An Overview Of The New Federally Funded Coronavirus Leave Programs
Written by: Erika Todd and David Guadagnoli
Client Alert
March 24, 2020

Effective March 28, 2020:
Updated to include a link to a new model poster and details on fulfilling the poster requirement, as well as information on (and links to) additional DOL guidance concerning how to count employees for purposes of determining whether an employer is subject to the new provisions.

The second-wave of federal legislation – the Families First Coronavirus Response Act (the Act) – became law on March 18, 2020. It was subsequently amended by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) The new law is aimed at addressing COVID-19 by making expansions to the Family and Medical Leave Act (FMLA) and by enacting a new federal Paid Sick Leave Act (PSLA). The Act provides a unique tax credit approach for employers to cover 100% of the costs resulting from these new requirements.

Emergency Family and Medical Leave Expansion Act – Division C of the Act expands both FMLA coverage and eligibility for employees on a temporary basis, beginning no later than April 2, 2020 and continuing through December 31, 2020, and in a number of ways.

The Act provides for paid FMLA coverage to employees who are unable to work (or telework) because of a loss of child care, whether that child care was previously provided by schooling or an on-site or a paid (non-family/friend) at home provider, as a result of a public health emergency (COVID-19). The first 10 days of leave may be unpaid, although an employee may choose to take accrued vacation, personal, medical or sick leave during this period. After the first 10 days, additional leave must be paid at least 2/3rds of the employee’s regular rate of pay and assuming normally scheduled hours. As clarified in the CARES Act, an employer is not required to pay more than $200 per day and not more than $10,000 in the aggregate per employee.

This new category of FMLA leave, which is reserved for employees who lose paid childcare because of COVID-19, has several other important differences from standard FMLA leaves. First, the Act revises the current employee threshold for this new FMLA coverage. During this time, all employers with fewer than 500 employees are subject to the new FMLA requirements whereas previously only employers with 50 or more employees were subject to the FMLA. Exceptions to the new FMLA requirements exist for health care and emergency response workers.

Second, the Act extends FMLA eligibility to all employees after 30 days of employment and, under the CARES Act, includes rehired employees that were laid off on or after March 1, 2020 (and otherwise met the 30 days of employment criteria before being laid off). This is a marked shift from the previous requirement that an employee work for at least one year and 1,250 hours prior to eligibility.

Finally, employers with 25 or more employees must reinstate any employee returning from the new FMLA leave to their same or equivalent position. Employers of fewer than 25 employees are exempted from the reinstatement requirement if the following conditions are met:  (1) the employee’s position no longer exists due to an economic downturn or other circumstances caused by a public health emergency during the period of Emergency FMLA; and (2) the employer makes reasonable efforts to return the employee to an equivalent position for up to a year following the employee’s return from leave.

As noted, the new requirements become effective no later than April 2, 2020 and generally sunset as of December 31, 2020.

Emergency Paid Sick Leave Act – Division E of the Act, which provides for two weeks of paid sick leave for employees, generally applies to employers with fewer than 500 employees and is available to all employees, regardless of the length of employment.

Under this new law, employees in the following categories are eligible for the benefit:

  1. Subject to a Federal, state or local quarantine or isolation order related to COVID–19.
  2. Advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  3. Experiencing symptoms of COVID–19 and seeking a medical diagnosis.

For employees in the preceding categories, sick leave is paid at the employee’s regular rate of pay (unless the Federal, state or local minimum wage is higher), but not more than $511 per day and $5,110 in the aggregate.

  4. Caring for an individual who is described in (1) or (2) above.
  5. Caring for a child if the school or childcare site is closed or child care is not available, due to COVID–19 precautions.
  6. Any other substantially similar condition to the preceding as specified by HHS.

For employees receiving leave under (4), (5) or (6), the amount payable is 2/3rds of the employee’s regular rate of pay (unless the Federal, state or local minimum wage is higher), but not more than $200 per day and $2,000 in the aggregate.

Full time employees are entitled to 80 hours of paid sick time and part time employees are entitled to paid sick time for their average working hours over a two-week period.

According to FAQs published by the U.S. Department of Labor (DOL), the number of employees is determined as of the date the leave is taken based on the number of full-time and part-time employees employed in the United States, including employees on leave and employees jointly employed with another employer. The guidance also provides details on how to count hours for part-time employees. 

Employers will be required to post a PSLA notice by April 1st, and the Department of Labor has issued a model notice (a separate model notice is available for federal workers). The DOL also issued guidance about how posting requirements can be fulfilled by emailing or direct mailing the notice or by posting the notice on an internal or external website. Violations of the PSLA are treated as a violation of the FLSA and may result in fines, imprisonment, damages and/or attorney’s fees; however, the DOL issued a nonenforcement policy for 30 days until April 17, 2020 for those employers that act reasonably and in good faith.

Employers that are health care providers or emergency responders need not offer the new benefit and employers with less than 50 employees may not be subject to the new law if a determination is made that doing so would jeopardize the viability of the business.

Employers may not discriminate against employees who take the new paid sick leave and the new paid sick leave is to be taken before other employer provided paid leave.

The new requirements become effective no later than April 2, 2020 and generally sunset as of December 31, 2020.

Funding through tax credits – Each of the new paid FMLA and PSLA laws are funded by the Federal government through a tax credit system. This includes not only the paid leave benefit but also includes an amount equal to the cost of the employer’s qualified health care expenses (amounts paid for group health coverage) allocable to the paid leave.  Division G of the Act governs how this aspect of the law is to work.

An employer is able to claim a credit against their quarterly payroll tax liability for up to 100% of the qualified sick leave wages paid, subject to the various applicable per day and per individual limits, plus the group health plan coverage cost. According to recently published guidance and as provided for under the CARES Act, employers will be able to take the extraordinary action of retaining withheld income and Social Security taxes (employee and employer share) in an amount equal to the liability. If the potential credit is greater than the withholding liability, an employer will be able to apply for a refund.

Please feel free to reach out to any member of our Employment and Benefits Practice Group if you have any questions about how these new laws apply or if you would like assistance in updating your FMLA and leave policies.

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