It’s been a busy few weeks for government officials, with Congress passing multiple sweeping laws in response to the COVID-19 pandemic, each with potentially big implications for small businesses. In this post, we will discuss some key takeaways for your business from the Families First Coronavirus Response Act (FFCRA), which was enacted in March and took effect April 1, 2020. Stay tuned for more updates on the FFCRA and the Coronavirus Aid, Relief, and Economic Security (CARES) Act as they develop.
For more on navigating the current environment, visit our COVID-19 page for general resources and information.
What is the FFCRA?
The FFCRA is the second of three major laws passed by Congress in response to COVID-19. Most notably, the FFCRA temporarily mandates covered small and midsize employers to provide eligible employees with paid sick leave and paid family and medical leave for certain specific COVID-19 related qualifying reasons. The FFCRA allows covered employers to claim employer payroll tax credits to cover the cost of providing paid leave required under the FFCRA.
The FFCRA also contains provisions regarding health insurance coverage for COVID-19 testing, funding for state unemployment insurance programs and other benefit programs, among other provisions.
The FFCRA’s Leave Requirements
The FFCRA temporarily requires covered employers (generally, companies with fewer than 500 employees), to provide eligible employees with two new forms of leave between April 1, 2020 and December 31, 2020:
Emergency paid sick leave (EPSL): roughly two weeks (80 hours for full-time employees or the number of hours a part-time employee typically works in a two-week period) for employees who are unable to work or telework due to certain qualifying reasons relating to their own COVID-19-related care or quarantine or to care for another.
Emergency family and medical leave (EFML): 12 weeks (first two are unpaid, the remainder are paid) for employees who are unable to work or telework due to the need to care for a child whose school is closed or care is unavailable for COVID-19-related reasons.
Employees may use EPSL or other available PTO during the two-week unpaid portion of EFML to avoid a gap in pay. However, FFCRA leave is subject to pay caps:
$511/day for EPSL taken by an employee for their own care.
The lesser of two-thirds the employees normal pay (or minimum wage if more) or $200/day for EPSL or EFML for an employee taking FFCRA leave to care for another.
Employers can provide additional pay, but cannot claim tax credits beyond the amounts required under the FFCRA.
The following chart summarizes the various qualifying reasons for FFCRA leave, as well as the applicable pay caps and amount of leave that may be taken depending on the qualifying reason for the leave.
Understand your FFCRA eligibility with our breakdown.
Notably, per the federal Department of Labor’s (DOL) guidance, FFCRA leave is generally not available to employees who do not have work available to them due to a full or partial business closure due to COVID-19-related economic reasons or a government closure of non-essential businesses. According to the DOL, this circumstance generally does not meet the qualifying reason of being unable to work or telework because the employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19. Other programs under the CARES Act may be available to your business to keep employees on payroll when they do not qualify for FFCRA leave.
To learn more about the eligibility requirements under the FFCRA and other considerations for employers regarding COVID-19, visit the DOL’s COVID-19 website, which includes FFCRA guidance for employers and employees, and answers to frequently asked questions about the FFCRA. Businesses should also consult their legal advisor if they have questions regarding their obligations under the FFCRA.
FFCRA Tax Credits
Generally, the FFCRA allows covered employers to claim certain employer payroll tax credits to cover wages and certain other expenses paid for leave that they were required to provide employees under the FFCRA. Employers can access these tax credits immediately by reducing their payroll tax deposits.
Importantly, employers cannot claim FFCRA tax credits unless the leave was required under the FFCRA, so it’s important that all employers understand the FFCRA’s requirements regarding covered employers, eligible employees, and qualifying reasons for taking FFCRA leave. Additionally, the IRS has issued specific guidance regarding the documentation employers must collect to substantiate their claim for FFCRA tax credits.
For more information on FFCRA tax credits, employers should review the IRS’s guidance and consult with their tax advisor or attorney.
Additional Requirements & Considerations
It’s important to keep in mind that the regulatory landscape around COVID-19 is fluid and may change quickly. The DOL and IRS are frequently adding to and tweaking their guidance regarding the FFCRA and CARES Act.
Additionally, some states, such as New York, have also passed COVID-19-specific paid leave laws and others are likely to follow. Moreover, employers should be mindful of existing paid and unpaid leave requirements under federal, state, and local law, and should consult with their attorney about how these laws interact.
New Justworks Tool to Support FFCRA
As the FFCRA was being finalized, Justworks began working on a new tool that would help our customers take the right actions to support their businesses and take care of their teams. That new tool launched on April 1, 2020 and is available for customers to use for scheduling FFCRA paid leave and claiming applicable FFCRA tax credits.
Visit our Help Center page for a detailed breakdown and video walkthrough of the tool, its features, and how to use them.
We’ve Got Your Back
While the information here is not exhaustive, it covers the points we believe are most relevant to the small business community. Things are still rapidly changing in this new and confusing landscape, so we’re doing our best to support you, your business, and your employees at this time with clear, up-to-date information.
We will continue to update this post as things change and more information is made available. In the meantime, you can find more about government and other COVID-19 programs via the DOL, IRS, SBA, Department of Treasury, CDC, WHO, or our COVID-19 guide. You should also consult your tax professional or legal counsel to discuss your specific situation.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.