A new law was passed today mandating paid sick and family leave in response to the COVID-19 epidemic.
On 18 March 2020, the U.S. Congress passed, and the President signed into law, sweeping legislation under which businesses with less than 500 employees will be required to provide paid sick and family leave for up to 12 weeks to most employees. Those businesses will be entitled to an offsetting credit against employment taxes.
Provisions in the Law
Although the new law is hundreds of pages long, and very complicated, here is a summary of its provisions:
Eligible employees are those who have been employed for at least 30 days. Both full-time and part-time workers are covered. The conditions that qualify for paid leave are as follows:
- The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a healthcare provider to self-quarantine due to COVID-19 concerns.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in (1) above, or who has been advised as in (2).
- The employee is caring for a child of the employee if the school or place of care of the child has been closed, or the child care provider is not available, because of Covid-19 precautions.
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of Treasury and Labor.
For the first two weeks, paid sick leave is required at 100% of salary, capped at $511 per day, for absence under the first three conditions, and at 2/3 of pay, capped at $200 per day, for the other three conditions. Part-time employees are entitled to an equivalent amount calculated based on their weekly hours of work.
For an additional 10 weeks, an employee meeting any of the six conditions is entitled to 2/3 paid family sick leave, again capped at $200 per day.
Special provisions provide “salary” computation rules for hourly employees, who are also covered if they meet the conditions above.
As noted, the law does not apply to companies with over 500 employees, which generally are already required to or do provide paid sick leave. It also contains a provision under which companies with less than 50 employees may be exempted from the 10-week (but not the two week) requirement under Department of Labor regulations (to be published) if the requirement “would jeopardize the viability of the business as a going concern.” The law applies to all employers, whether corporate or not.
Employers with over 25 employees are also required to restore employees who have to take emergency leave to their prior position, or an equivalent position with the employer, when they return from leave. Employers with fewer than 25 employees are exempted from this requirement if the position no longer exists due to changes in the employer’s economic or operating condition, so long as the employer makes “reasonable efforts” to restore the employee to an equivalent position and, if none is available, for one year makes reasonable efforts to contact the employee if such a position does become available.
The new requirements are effective 15 days after enactment. Consequently, paid leave will be required by early in April.
Companies required to provide the relief are compensated for any relief provided through a 100% refundable tax credit for the sick and family leave pay against employment taxes. There may be a cash flow issue for some as the credit is not realized until employment taxes are due, while the leave payments are made on the regular salary schedule. However, the 90-day payment delay for federal income taxes announced March 18 may help to offset some cash flow issues, even though employment taxes themselves are not eligible for the delay. An innovative provision allows the self-employed access to the employment tax credits as well.
Among the many unanswered questions are whether employees of businesses that either voluntarily shut down due to Covid-19 concerns, or are ordered to do so by a government, qualify for leave. It is likely the answer is “no.”