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Families First Coronavirus Response Act: What Small and Midsize Businesses Should Know

As the ongoing COVID-19 pandemic causes significant economic challenges for Americans across the nation, policymakers passed a major legislative initiative to address the impact the virus has had on employees, small and midsize businesses. On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (Act) which promises to offer relief to companies who provide coronavirus-related leave to their employees. Businesses with fewer than 500 employees will now have access to two new payroll tax credits to help employees access paid leave to recover and care for family members that have been infected with COVID-19.

The Act, among other provisions, ensures that small and midsize businesses receive refundable tax credits for providing qualifying employees with paid leave. It also provides two types of paid leave to employees who are affected by the pandemic. It is essential that businesses understand these requirements fully, as certain restrictions or exemptions might preclude them from qualifying for this help. Below is a summary of the financial assistance provided by the Act:

Paid Sick Leave & Financial Assistance to Employers

The Act provides that qualifying full-time employees can receive two weeks, or 80 hours, of paid sick leave at 100% of the employee's pay where the employee is unable to work because the employee is:

  • quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis;
  • is unable to work because of a need to care for an individual subject to quarantine;
  • to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19;
  • and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee's pay.

Under this law, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days, for a qualifying employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. They will also receive a credit for the cost of maintaining health insurance for the employee. This relief is available until December 31, 2020.

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

In addition, an employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at two-thirds the employee's pay. Eligible employers may receive a refundable child care credit. This credit equals two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate.

Businesses are required to provide this assistance to all employees, regardless of their length of employment. When an eligible employee returns to work, employers are required to restore them to the same position, or one that is equivalent, with the same payment and benefits they had before.

As of recent, we are monitoring the status of the $2 trillion stimulus package that is working its way through congress. As the COVID-19 pandemic and the government’s response evolve, we will continue to update you with any new developments that may impact your business. For specific guidance on your situation or for any questions you may have regarding the information we provided above, please contact us.