Families First Coronavirus Response Act

Share this Article
Facebook Icon LinkedIn Icon Twitter Icon
Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
Jason@FreemanLaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine, a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act, which includes the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act (collectively, the “Act”).  The Act brings into effect sweeping changes for certain small businesses which have employees who are affected by the COVID-19 outbreak.  The Act’s provisions are generally effective from April 2, 2020, through December 31, 2020.

Emergency Family and Medical Leave Expansion Act

Under the Act, the Family and Medical Leave Act of 1993 (“FMLA”) has been amended to include FMLA leave for a “qualifying need” related to a COVID-19 emergency declared by a Federal, State, or local authority.  For these purposes, a qualifying need means the employee is unable to work (or telework) due to the need for leave to care for a child under the age of 18 if the school or place of care has been closed, or the child care provider of the child is unavailable, due to a COVID-19 emergency declared by a Federal, State, or local authority.

Eligible employees who qualify are those who have been employed for at least 30 calendar days by the employer, provided the employer has less than 500 employees.  However, the Secretary of Labor has the authority to issue regulations for “good cause” to exclude certain employees in the medical field.  In addition, the Secretary of Labor has the authority to exempt certain small businesses with fewer than 50 employees from the new FMLA requirements if the imposition of the new requirements would jeopardize the viability of the business as a going concern (“Small Business Exception”).

Employers may require an employee who takes FMLA leave to take unpaid leave for the first 10 days.  But the employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave.  After the first 10 days, the employer must provide paid leave to the employee based on:  (1) an amount not less than two-thirds of the employee’s regular rate of pay (as determined under 29 U.S.C. § 207(e)), and (2) the number of hours the employee would otherwise be normally scheduled to work, unless the employee has a varying schedule of hours, which is computed differently.  The employer is not required to pay leave in excess of $200 per day and $10,000 in the aggregate.

Emergency Paid Sick Leave Act

The Act also mandates employer paid sick time to the extent an employee is unable to work (or telework) due to the following:

Full-time employees are entitled to paid sick time for up to 80 hours of work and part-time employees are entitled to paid sick time equal to the number of hours in which the employee typically works, on average, over a 2-week pay period.  For (1) through (3) above, the employee’s paid sick time cannot exceed $511 per day and $5,110 in the aggregate.  For (4) through (6) above, the employee’s paid sick time cannot exceed $200 per day and $2,000 in the aggregate.

If the employer fails to provide paid sick time under the Act, the employer may be liable for penalties with respect to each violation.  In addition, the employer can be held liable for penalties if the employer discharges, disciplines, or in any other way discriminates against an employee who takes paid leave in accordance with the Act.

Employers are required to post a notice of the Act and its requirements in a conspicuous place on the employer’s premises.  The Secretary of Labor will make publicly available a model notice.

Similar to above, the new paid sick time law generally applies to any employer who employs less than 500 employees.  The new laws also provide the Secretary of Labor with authority to issue regulations for “good cause” to exclude certain employees in the medical profession and certain small businesses under the Small Business Exception.

Payroll Tax Credits

Because employers are required to pay FMLA leave and paid sick time where applicable, the Act provides payroll tax credits to employers.  Employers can obtain the payroll tax credits through a credit on their quarterly employment tax returns (Forms 941).  If the payroll tax credit exceeds the amount of payroll tax for the quarter, the excess is treated as an overpayment and will be refunded by the IRS to the employer.

The Act provides a similar payroll tax credit for self-employed individuals, provided the individual regularly carries on a trade or business and would have otherwise qualified for paid leave under the Act if the individual were an employee.

Generally, any amounts required to be paid under the Act are not considered wages for purposes of the self-employment tax.

IR 2020-57

On March 20, 2020, the Treasury Department, IRS, and Department of Labor issued a News Release, which indicated that they were working on providing additional guidance on the Act.  In the News Release, they also stated:

Example:

An eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all of its employees.  The employer may use up to $5,000 of the $8,000 in payroll taxes it was going to deposit to make the qualified leave payments.   The employer is required to deposit the remaining $3,000 in its next regular deposit date.

Example:

An eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in payroll taxes.  The employer may use the entire $8,000 in payroll taxes in order to make the qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

 

A copy of the Families First Coronavirus Act can be found here.

A copy of the Treasury Department, IRS, and Department of Labor News Release can be found here.

 

Business Tax Planning Lawyer

Need assistance in managing the business planning processes? Freeman Law advises clients with corporate and other entity formations and reorganizations. Restructuring entities—through conversions, mergers, and liquidations—can involve particularly complex tax and regulatory considerations. Freeman Law provides experienced tax and business counsel, helping our clients achieve their organizational goals in a tax-efficient manner. Schedule a consultation or call (214) 984-3000 to discuss your corporate structuring or business and tax planning concerns.