Several major pieces of legislation have been passed in response to the Coronavirus outbreak in the United States. You might have heard about the CARES Act, which deals with direct stimulus payments to individuals and families, as well as broadening unemployment measures.
Equally important for law firms to understand is the Families First Coronavirus Response Act (FFCRA), a bill requiring employers of under 500 employees* to grant their employees paid sick leave and family leave. Many small and midsize law firms are affected by the bill. Knowing what you’re required to do is critical to ensure you’re in compliance.
The two new emergency leave benefits required to be made available for eligible employees include Emergency Paid Sick Leave (EPSL) and Emergency Family Medical Leave (EFML). EPSL must be effective for any leave taken between April 1, 2020 and December 31, 2020. An employee will be considered “sick” for purposes of obtaining EPSL if they are under a federal, state, or local quarantine or isolation order related to Coronavirus; if they have been advised to self-quarantine by a healthcare provider; or if they are experiencing any symptoms of Coronavirus and are seeking medical attention. If the employee is taking EPSL for himself or herself, the maximum EPSL benefit will be the lesser of either the employee’s regular daily rate of pay, or $511 per day. An employer could choose to pay the employee’s regular daily pay if it exceeds $511 but cannot claim the tax credit for the excess paid. EPSL may also be taken if an employee needs to care for someone else who is ill as a result of Coronavirus. The caregiving EPSL is capped at a lower rate of the lesser of two-thirds of regular daily pay or $200 per day.
EPSL is required to be given for a maximum of 80 hours over a two-week period, or two regular 40-hour work weeks. It is not required to be paid for by employers beyond a two-week period. Employers may, however, have employees who first claim EPSL and thereafter take EFML, the paid family leave required under the FFCRA. EFML must be available to any employee who has worked for your firm for a minimum of 30 days and is currently unable to work due to the need to care for a child whose school is closed, or other childcare provider is unavailable. Many daycares are closed, and nannies and babysitters may not be able to travel. The first 10 days of EFML is unpaid but thereafter employees may claim EFML for up to 10 weeks, non-consecutively if they so choose, at the rate of the lesser of two-thirds of regular daily pay or $200 per day. Thus, the maximum benefit under EFML per employee is up to $10,000, or $1,000 per five-day workweek for 10 weeks.
If one of your employees takes both the maximum EPSL and EFML benefits, you will need to pay them more than $15,000 for a period of time in which they are not working. Multiply this by the number of employees you have, and it adds up quickly. Because offering these types of paid leave was previously optional for employers, the FFCRA also provides for government-funded financial relief. Employers affected by the bill will receive dollar-for-dollar payroll tax credits to cover the cost of paid sick and family leave. The tax credits will be used against social security taxes paid by the employer. In order to obtain the tax credits, employers must file Form 941 during tax season. It may be useful to address this form with your accountant in order to ensure you obtain proper financial relief for complying with the new paid leave requirements.
If you manage your own small or midsize law firm, taking advantage of these payroll tax credits for offering paid leave may be a wiser financial decision than trying to participate in other government-funded programs that are over-taxed during the Coronavirus epidemic. Small business loans under the CARES Act have been difficult to obtain, and unemployment for individual workers equally so. Implementing EPSL and EFML for your employees may be a smoother ride than furloughing them and having them apply for unemployment, and the cost to you will be minimal due to the availability of the payroll tax credits. If you’re interested in learning more, contact your accountant or a specialized accounting firm for attorneys like Legal Thrive today.
* Employers with less than 50 employees can request an exemption.