U.S. Department of Treasury, IRS, and U.S. Department of Labor Announce Plan to Implement Paid Leave and Tax Credit Provisions of the Families First Coronavirus Response ActApril 22, 2020
The DOL has also posted guidance regarding the FFCRA in the form of a Questions and Answers document, which it continues to update, including on or around April 20, 2020. Our other posts regarding the DOL’s guidance are available here: Part I, Part II, and Part III.
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On March 20, 2020, the U.S. Department of Treasury, Internal Revenue Service (“IRS”), and the DOL issued a joint news release regarding their plan to implement the paid leave and tax credit provisions of the FFCRA, in particular: (1) the Emergency Family and Medical Leave Expansion Act (the “Expansion Act”); (2) the Emergency Paid Sick Leave Act (the “Sick Leave Act”); and (3) Tax Credits for Paid Sick and Paid Family and Medical Leave. The release provides an overview of the key requirements of these provisions and announces a plan to issue emergency guidance and regulations regarding certain provisions. The following are key takeaways for employers from the release:
- Tax Credits
- Use of Payroll Taxes. The release provides that businesses can take immediate advantage of the paid leave credits by “retain[ing] and access[ing] funds that they would otherwise pay to the IRS in payroll taxes. 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 streamlined claim form that will be released” this week.
- Retaining Payroll Taxes. Under guidance issued by the IRS, eligible employers who pay qualified sick or child care leave under the FFCRA will be able to retain an amount of the payroll taxes equal to “the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.” The taxes that employers may retain include federal income tax withholdings, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes for all employees.
- Expedited Treatment of Refund Requests. If there are insufficient payroll taxes to cover the cost of the qualified leave under the FFCRA, employers will be able to request an accelerated payment from the IRS. The IRS “expects to process these requests in two weeks or less,” and the “details of this new, expedited procedure will be announced” this week.
- Health Insurance Costs. Employers may also claim tax credits for health insurance costs related to paid leave required under the FFCRA.
- Child Care Leave. According to the release, an employee who receives paid leave “to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19” under the Sick Leave Act “may in some instances receive up to an additional ten weeks of expanded paid family and medical leave” under the Expansion Act. All child care leave is paid at two-thirds of the employee’s regular salary, up to $200 per day, with aggregate caps of $2,000 under the Sick Leave Act and $10,000 under the Expansion Act for each employee. An employee may choose to substitute certain paid leave during the first two weeks of otherwise unpaid family leave, but the employer may not require an employee to do so. The release confirms that a qualifying employee may receive up to 12 weeks of paid child care leave by first using paid leave available under the Sick Leave Act and then using paid leave available under the Expansion Act, without having to first use the first two weeks of otherwise unpaid leave available under the Expansion Act.
- DOL to Issue Emergency Guidance and Rulemaking on Small Business Exemption for Child Care Leave. The FFCRA gives the DOL the authority to issue regulations that allow exemptions from the Expansion Act and the Sick Leave Act to an employer with fewer than 50 employees without following the standard public comment period. The release addresses possible exemptions, stating that “[e]mployers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed or child care is unavailable in cases where the viability of the business is threatened.” The release further states that this exemption “will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern” and notes that the DOL “will provide emergency guidance and rulemaking to clearly articulate this standard.” Our memorandum to clients covering the Rule is available here.
- 30-Day Non-Enforcement Period. The DOL issued a temporary non-enforcement policy that provides for a period of time for employers to comply with the FFCRA. Under this policy, the DOL will not bring an enforcement action for FFCRA violations if “the employer has acted reasonably and in good faith to comply with” the FFCRA. The DOL “will instead focus on compliance assistance during the 30-day period.” Notably, on March 21, 2020, the DOL posted information on https://www.dol.gov/agencies/whd/pandemic, including general information concerning an employer’s leave obligations under the FFCRA. That posting further clarifies that “[f]or purposes of this non-enforcement position, ‘good faith’ exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the [DOL] receives a written commitment from the employer to comply with the Act in the future.” On April 20, 2020, the DOL announced the end of the temporary period of non-enforcement.
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