March 26, 2020 - In response to the COVID-19 crises, both the State and Federal governments have enacted laws making paid leave available to some employees impacted by the spread of the virus.  Employees may be entitled to leave under the Families First Coronavirus Response Act (FFCRA), under New York’s expansion of Paid Family Leave (PFL), or both. However, all employers, regardless of size, must provide job protection for the duration of the order of quarantine or isolation.  It is also important to note that if an employer is covered by the federal and state leave laws, an employee’s use of paid leave runs concurrently under both laws.

Federal -

On March 18, 2020, President Trump signed the FFCRA into law.  The FFCRA will go into effect “not later than 15 days after the date of enactment” (i.e., no later than April 2, 2020). The FFCRA applies to employers with less than 500 employees and contains two different provisions requiring employers to provide paid leave related to COVID-19: (1) the Emergency Paid Sick Leave Act (“EPSLA”) and (2) the Family Medical Leave Act (“FMLA”) Expansion.

Emergency Paid Sick Leave Act

• If an employee (1) is subject to a federal, state or local quarantine or isolation order related to COVID-19; (2) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or (3) is experiencing symptoms of COVID-19 and seeking a medical diagnosis, the employee is entitled to emergency paid sick leave regardless of how long they have been employed. The employee is entitled to two weeks of paid leave, up to 80 hours, at their full rate of pay.  Benefits are capped at $511 per day and $5,100 for these leave categories. 
• If an employee (1) is caring for an individual who is subject to a federal, state or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to COVID-19 concerns; (2) is caring for a child whose school or child care is closed or unavailable due to COVID-19; or (3) is experiencing a substantially similar condition that entitles the employee to leave as specified by designated federal officials, the employee is entitled to two weeks of paid leave, up to 80 hours, paid at 2/3 of their regular rate of pay. Benefits under this tier are capped at $200 per day and $2,000 total. 

Employees cannot be required to use other accrued paid leave before using the paid sick leave available under the FFCRA. 

Family Medical Leave Act Expansion

• If an employee has been employed for at least 30 days and is unable to work because they must care for a child whose school or child care provider has closed or is unavailable for reasons related to a public health emergency, including the COVID-19 crises, they are entitled to additional paid leave for up to ten weeks.  Paid leave begins after the employee has been out of work to provide such care for ten days.  During the initial ten days before the paid leave begins, the employee may use any accrued leave, whether paid or unpaid.  Employees qualifying for this expanded FMLA leave must be paid at 2/3 of their regular salary, capped at $200 per day and $10,000 total. 
• As with ordinary Family Medical Leave, after taking any of the above paid leave, employees must generally be restored to either the position they held prior to taking the leave, or an equivalent position with equal pay and benefits.

Small Business Exemption

Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue.

Tax Relief for Covered Employers

Employers will receive 100% reimbursement for emergency paid sick leave and the expanded FMLA leave available under the FFCRA through refundable payroll tax credits equal to the mandated benefits. Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Businesses may retain funds that they would otherwise pay to the IRS in payroll taxes to cover the cost of paid leave. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a claim form that will be released next week. 

For example, if an eligible employer paid $6,000 in sick leave and is otherwise required to deposit $10,000 in payroll taxes, the employer could use up to $6,000 of the $10,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $4,000 on its next regular deposit date.

If an eligible employer paid $11,000 in sick leave and was required to deposit $7,000 in taxes, the employer could use the entire $7,000 of taxes in order to make qualified leave payments, and file a request for an accelerated credit for the remaining $4,000.

New York State -

New York State also passed the Paid Sick Time Plan, which became effective on March 18, 2020. This law grants workers job protection and provides financial compensation while they or their minor dependent child are on a mandatory or precautionary quarantine due to COVID-19. These benefits are not available to employees who are able to work through remote access or other means. The leave available to employees depends on the size of your business as of January 1, 2020, and/or whether you are a private or public employer.

If you are quarantined yourself, the benefits available depend on the size of the business you work for:

• Small businesses with 10 or fewer employees as of January 1, 2020, with net annual income less than $1 million last year:
  • Employer must provide employees with benefits through the business’s Paid Family Leave (PFL) and disability benefits policy for the duration of the order of quarantine or isolation.
  • Eligible employees can use PFL. This is insurance coverage that provides up to 60% of pay, up to a maximum weekly benefit of $840.70.
  • After receiving the full PFL benefit, they will receive disability benefits to match their full wages up to a maximum weekly disability benefit of $2,043.92, for a total of $2,884.62 per week.
  • There is no waiting period for either benefit.
• Medium businesses with 11-99 employees as of January 1, 2020, and smaller employers (1-10 employees) that had a net annual income greater than $1 million last year:
  • Employers must provide employees with at least 5 days of paid sick leave. After 5 days of paid sick leave, employees can then access benefits through the businesses Paid Family Leave (PFL) and disability benefits policy.
  • Eligible employees can then use NY PFL. This is insurance coverage that provides up to 60% of your pay, up to a maximum weekly benefit of $840.70.
  • After receiving your full PFL benefit, you will receive disability benefits to match your full wages up to a maximum weekly disability benefit of $2,043.92, for a total of $2,884.62 per week.
  • There is no waiting period for either benefit.
• Large businesses with 100 or more employees as of January 1, 2020 and Public employers (no matter how many employees) must provide employees with at least 14 days of paid sick leave.

Eligible employees whose dependent child is under an order of mandatory or precautionary quarantine or isolation, are also able to take Paid Family Leave for the duration of the quarantine/isolation. In 2020, the Paid Family Leave wage benefit is 60% of your average weekly wage, up to a maximum weekly benefit of $840.70.

Additionally, employees caring for family members that have contracted the COVID-19 virus may be entitled to PFL as they would if they were caring for a family member suffering from any other serious health condition.

Both federal and state governments have been forced to adapt quickly, and at times daily, to an ever-changing environment caused by the COVID-19 emergency. We are here to help you and your business move forward during these unprecedented times. If any questions arise regarding the above, please do not hesitate to contact your trusted advisor at Dermody, Burke & Brown, CPAs.

The information reflected in this article was current at the time of publication.  This article will not be modified or updated for any subsequent tax law changes, if any.