Seyfarth Synopsis: As reported in Part II of our "Paid Leave and Coronavirus" series, the U. S. House of Representatives (the "House") passed the Families First Coronavirus Response Act ("HR 6201" or the "Bill") in the early hours of March 14, 2020 as a means of combating the 2019 Novel Coronavirus disease, also known as COVID-19. Yesterday (i.e., March 16), the House updated HR 6201, through H. Res. 904, 166 CR 1698, with a series of what has been deemed "technical corrections," but sweep more broadly. A number of these changes affect HR 6201's provisions on (a) paid family and medical leave (PFML), (b) paid sick time (PST), (c) tax credits for PFML and PST, and (d) medical plan components.1
This Alert focuses on changes to HR 6201's PST and PFML components, including the corresponding tax credits.
As cautioned below, bear in mind that as you read this Alert, it is still possible that HR 6201 could undergo further changes once it is taken up in Senate, which is expected as early as later today. There is also now a possibility that an economic relief package will be added to this legislation in the Senate. If changes are made, the Bill will then have to be returned to the House, which is now in recess, for a re-vote or sent into conference. The situation is still fluid and therefore the requirements described here could very well change. We will track the situation as it evolves.
Paid Family and Medical Leave and Paid Sick Time
Most notably, the House's HR 6201 "technical corrections" do not change the scope of covered private employers. Thus, if passed, the PFML and PST mandates in HR 6201 would not be applicable to private employers that employ 500 or more employees. Also unchanged is that both the PFML and PST mandates would still go into effect no later than 15 days after HR 6201 is signed and would sunset on December 31, 2020. As noted in more detail below, the "technical corrections" affect the covered reasons for both PFML and PST – narrowing the PFML covered reasons and seemingly broadening the PST covered reasons. That said, the covered reasons for use under the PST and PFML sections still do not rely on "serious health condition" as defined under the FMLA and instead remain tied to various COVID-19 related absences. Tax credits are still specified in HR 6201 and intended to offset the cost of providing the paid leave that would now be required of these covered smaller businesses.
Here are some additional highlights of yesterday's "technical corrections" on HR 6201's PFML and PST mandates:
PFML Mandate - Technical Corrections.2
- PFML Topics from Prior Alert Unaffected by Technical Corrections: (a) Employee eligibility (eligible if they have been employed for at least 30 calendar days by the employer); (b) Employer coverage threshold (as noted above, a private employer will be covered if it employs fewer than 500 employees); (c) Treatment of CBAs (still no exemption); (d) Intermittent leave (still no express standard); (e) Employee notice to company; and (f) Reinstatement. See Part II of our "Paid Leave and Coronavirus" series for more information on these topics.
- New Covered Absence Under FMLA: As noted in Part II of our series, HR 6201 would allow eligible employees to receive FMLA leave because of a qualifying need related to a public health emergency. However and notably, the HR 6201 technical corrections removed two of the three covered reasons that constituted a "qualifying need related to a public health emergency."3 Now, "public health emergency leave" for PFML absences would cover the following:
- Instances where the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.4
As explained in more detail below, following the technical corrections, the reasons for use for PST under HR 6201 are significantly broader than the above PFML "public health emergency leave."
- Consists of Both Paid and Unpaid Leave; however, length of unpaid leave decreased and amount of public health emergency leave clarified:
- Unpaid Portion: The technical corrections decreased the amount of unpaid public health emergency leave under HR 6201 from 14 days to 10 days. During this period an employee still can receive PST under HR 6201 that will be paid at no less than 2/3 of their regular rate of pay (see below for more details).5
- Paid Portion: After the initial 10 days, the employer is required to pay the employee for up to 10 weeks of leave at not less than 2/3 of an employee's regular rate of pay (under the FLSA).6 This was unchanged by the technical corrections. However, the technical corrections did add that such paid leave can be capped at $200 per day and $10,000 in the aggregate. This update appears to be consistent with relevant aspects of HR 6201's PFML tax credit; however, while an employer appears able to pay an employee an amount that is greater than the above caps, the employer would not receive any corresponding additional tax credit.
- Removed "Family Member" Definition: Following the House's technical corrections, the PFML section of HR 6201 no longer contains a definition of "family member," or any corresponding terms, such as "parent." This update is consistent with the updated covered reasons discussed above.
- Removed Language Regarding Employers Being Unable to Require Use of Company-Provided Paid Leave. The PFML provisions still state that an employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid public health emergency leave. However, the House's technical corrections removed the following -- "An employer may not require an employee to substitute any [public health emergency] leave."
- Added Special Rule for Healthcare Providers and Emergency Responders. The House's technical corrections to HR 6201 added a provision stating that an employer of an employee who is a health care provider or an emergency responder may elect to exclude any such employee from receiving public health emergency leave.7
PST Mandate - Technical Corrections
- PST Topics from Prior Alert Unaffected by Technical Corrections: (a) No preemption of state or local PST laws; (b) Employee eligibility; (c) Employer coverage threshold (as noted above, a private employer will be covered if it employs fewer than 500 employees); (d) Treatment of CBAs (still no exemption); (e) amount of PST (full-time employees still receive 80 hours; part-time employees still receive a prorated amount); (f) PST still available for immediate use; (g) Year-end carryover is still not required; (h) Employer cannot require employee to find replacements; (i) Employee notice to employer; (j) No discipline, discharge or discrimination in certain situations; (k) No payout on separation; (l) Posting requirement and forthcoming model poster. See Part II of our "Paid Leave and Coronavirus" series for more information on these topics.
- Covered Reasons for Use: As noted above, the House's technical corrections seemingly expanded the covered reasons for which employees can use PST. The covered reasons now include the following to the extent that the employee is unable to work (or telework) due to a need for PST because:
- (1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
- (2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- (3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- (4) The employee is caring for an individual who is subject to an order as described in reason for use (1) or has been advised as described in reason for use (2) (as described above).
- (5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions.
- (6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
The final of the above covered reasons for use is particularly noteworthy as it provides flexibility for the government to apply PST to additional absences as the COVID-19 situation evolves.
- Covered Family Member: A notable change in the above covered reasons for use is that employees can use PST to "car[e] for an individual" subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19. The "an individual" phrase is significantly broader than the "family member" term in the PST section that existed prior to the technical corrections. In addition to seemingly covering all family members, it appears that employees also would be able to use PST to care for non-family members (e.g., friends, neighbors, etc.) who are experiencing a covered COVID-19 reason (see above).
- Payment of Sick Time: The technical corrections did not change that certain PST absences are paid at 100% of employee's regular rate of pay or applicable minimum wage, whichever is greater, while other PST absences can be paid at an amount not less than 2/3 of their regular rate of pay. Specifically, covered reasons (1) through (3) above must be paid at the 100% rate, while covered reasons (4) through (6) above can be paid at the 2/3 rate. In addition, the technical corrections added that PST payments can be capped as follows: (I) $511 per day and $5,110 in the aggregate for covered reasons (1) through (3) (see above); and (II) $200 per day and $2,000 in the aggregate for covered reasons (4) through (6) (see above). This update appears to be consistent with relevant aspects of HR 6201's PST tax credit; however, while an employer appears able to pay an employee an amount that is greater than the above caps, the employer would not receive any corresponding additional tax credit.
- Relation to Existing Employer-Provided Paid Leave: The technical corrections removed the following regarding PST and its interplay with employer-provided paid leave: If an employer provides paid leave on the day before the date HR 6201 is enacted, (a) PST under HR 6201 must be made available to employees of the employer in addition to such paid leave, and (b) the employer may not change such paid leave on or after the date HR 6201 is enacted to avoid having to provide HR 6201 PST in addition to company-provided paid leave. This change provides employers with greater flexibility to administer their existing paid leave programs in light of the potential forthcoming federal mandate.
- Note: Following the technical corrections, HR 6201's PST provision still states that (a) an employee may first use PST under HR 6201 for covered reasons before using employer-provided paid leave, and (b) an employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses PST under HR 6201.
- Added Special Rule for Healthcare Providers and Emergency Responders. Generally the same as the update for these groups noted in the PFML section above.
Tax Credit on PFML and PST
The technical corrections also resulted in several updates to the tax credit portion of HR 6201. Our summary of the PFML and PST tax credit components from Part II of our Paid Leave and Coronavirus series follows.
As noted above, tax credits are specified in HR 6201 and intended to offset the cost of providing the paid leave now required of these smaller businesses. Generally speaking, an employer is required to withhold social security and Medicare taxes (collectively, "FICA Tax") from wages paid to its employees. An employer is also required to pay an amount of FICA Tax, commonly known as the employer's portion, that is equal to the amount of FICA Tax withheld. Section 7001 of HR 6201 generally allows an employer to claim a credit against the employer's portion of FICA Tax for a calendar quarter in an amount equal to Emergency Paid Sick Leave Act wages paid by the employer during such quarter plus the employer's qualified health plan expenses that are allocated to such wages. Qualified health plan expenses are generally amounts paid by the employer to maintain a group health plan and, until regulations are issued, such expenses will be considered properly allocated to qualified sick leave wages if the allocation is made pro rata among covered employees and on the basis of periods of coverage relative to the periods to which the sick leave wages relate.
However, the credit is subject to certain limitations. First, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to (a) $511 per day in the case of PST with respect an event involving the employee (i.e., the first three reasons for use listed in Section II.2 above), or (b) $200 per day, in the case of PST with respect an event involving the employee's family member (i.e., the fourth and fifth reasons for use listed in Section II.2 above). Second, in determining the total amount of an employer's qualified sick leave wages paid for a calendar quarter, the total number of days that the employer can take into account with respect to a particular employee for that quarter cannot exceed 10 days minus the total number of days taken into account with respect to such employee for all previous quarters.
The amount of the paid sick leave credit that is allowed for any calendar quarter cannot exceed the total employer portion of FICA Tax imposed on all wages paid by an employer to all of its employees during such quarter. If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is treated as an overpayment of tax by the employer, the same as if the employer had actually overpaid the employer's portion of FICA Tax. Accordingly, the IRS will pay or credit to the employer the amount of the deemed overpayment. Also, an employer who receives a credit for PST must include the amount of the credit in gross income. This is intended to prevent the employer from realizing a double benefit (i.e., a windfall) -- one being the receipt of the credit and the other being a tax deduction for the paid sick leave wages. To clarify, this does not nullify the tax credit, but by adding the amount of the credit to gross income, it offsets the tax deduction. Finally, an employer must exclude any wages taken into account in determining the paid sick leave credit when determining the paid family and medical leave tax credit under Internal Revenue Code Section 45S.
Section 7003 of the Act provides a tax credit for Emergency Family and Medical Leave Expansion Act wages. This credit is essentially the same as the credit for Paid Sick Leave Act wages discussed above, with three substantive differences. First, the amount of the credit is limited to the employer's portion of FICA Tax for a calendar quarter less the amount of the credit for paid sick leave wages allowed for such quarter. Second, the amount of wages that may be taken into account with respect to a particular employee in determining the amount of the credit is limited to $200 per day and an aggregate of $10,000 for all quarters. Third, the 10 day maximum limitation that applies to the sick leave wage credit does not apply to the qualified family leave wage credit.
As HR 6201 is up for consideration in the Senate, employers should consider taking the following steps:
- Monitor Senate activity for developments and updates regarding HR 6201, including potential changes to the above substantive standards.
- Review existing workplace policies relating to a wide host of issues, including travel, work from home, and other policies as well as existing leave policies, and assess the potential effect of HR 6201 on those policies.
- Consult Seyfarth's COVID-19 Resource Center for updated information regarding the rapidly evolving COVID-19 situation and its impact on the workplace.
With the COVID-19 and paid leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with HR 6201 and paid leave requirements generally. To stay up-to-date on COVID-19 developments, click here to sign up for our daily digest. To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth's Paid Sick Leave mailing list. Companies interested in Seyfarth's paid sick leave laws survey should reach out to firstname.lastname@example.org.
2. Note that the HR 6201 changes to the existing federal FMLA for private employers with less than 500 employees would only apply to FMLA absences related to a new qualifying event involving "public health emergency leave," as described below.
3. The covered reasons that have been removed broadly include (a) absences related to the employee complying with an order or recommendation from a public official or health care provider to stay out of their workplace due to contracting or having symptoms of COVID-19 (there are some additional nuances), and (b) caring for a family member under similar circumstances.
4. The term "public health emergency" means an emergency with respect to COVID-19 declared by a Federal, State, or local authority.
5. PST used under HR 6201 would be need to be paid at either 100% or no less than 2/3 of an employee's regular rate of pay, depending on the nature of the absence.
6. It still is unclear how much paid leave must be provided if some portion of that 10 weeks has already been used under existing FMLA obligations to provide unpaid leave before HR 6201 is enacted.
7. Note that the express language of this specific technical correction may not exclude every aspect of HR 6201's PFML updates. Most notably, the current language would not cover the provision regarding multiemployer CBAs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.