COVID LEAVE AND TAX CREDITS
Daniel E. Sarzynski, Esq.
James R. O’Connor, Esq.
With the increasing COVID-positivity rates and related school closures, employers should expect to see an uptick in leave requests. There are multiple types of leave available and some (but not all) are reimbursable from the federal government.
Which Type of Leave Applies?
Generally, employers must apply the most generous leave first, which is the leave provided for by the Families First Coronavirus Response Act (“FFCRA”). FFCRA provides up to 80 hours of paid sick leave to employees for their own health needs or to care for others, and up to an additional ten weeks of paid family leave to care for a child whose school or place of care is closed or unavailable due to COVID-19 precautions.
If an employee’s available FFCRA leave has expired, employers should look to the New York State COVID-PSL to see if the employee is eligible for benefits. New York’s COVID-PSL requires employers to provide certain job-protected benefits for employees who are subject to an official quarantine order from a government entity, with limited exceptions.
If the NYS COVID-PSL is unavailable—because, for example, the employee does not have an official quarantine order—there are other benefits that employers may be required to offer.
It is possible the employee could be entitled to traditional New York State Paid Family Leave if, for example, he or she is caring for a family member with COVID. Employers also should consider whether the employee is eligible for FMLA, or even a reasonable accommodation pursuant to the ADA in certain circumstances.
Finally, beginning in January 2021, employees may be able to use paid sick leave required by New York’s new Paid Sick Leave law.
What Employers Are Subject to FFCRA? Are There Any Exceptions?
FFCRA applies to every private employer with fewer than 500 employees and to certain public employers.
There is a “small business exemption” under FFCRA, but it only applies to certain portions of FFCRA. An employer with fewer than 50 employees (small business) is exempt from providing paid sick leave or expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would “jeopardize the viability of the small business as a going concern.”
A small business may claim this exemption if an authorized officer of the business has determined that:
1. The provision of paid sick leave or expanded family and medical leave would result in the small business’ expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of the employees’ specialized skills, knowledge of the business, or responsibilities; or
3. There are not sufficient workers who are able, willing, and qualified, and who would be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and this labor or these services are needed for the small business to operate at a minimal capacity.
There is no such exemption for the other provisions of FFCRA. The small-business exemption only applies to leave taken due to child-care concerns.
How to Get Reimbursed for Providing FFCRA Leave
Employers should take comfort in the fact that FFCRA payments are reimbursable to the employer vis-à-vis certain payroll tax credits. Eligible employers are entitled to receive a credit in the full amount of the qualified leave wages, plus allocable qualified health plan expenses and the employer’s share of Medicare tax paid for FFCRA leave. These reimbursements apply to FFCRA leave paid during the period beginning April 1, 2020, and ending December 31, 2020, the date FFCRA is set to expire.
Eligible employers that pay qualified leave wages under FFCRA will be able to retain an amount of all federal employment taxes equal to the amount of the qualified leave wages paid, plus the allocable qualified health plan expenses and the amount of the employer’s share of Medicare tax imposed on those wages, rather than depositing them with the IRS. The federal employment taxes that are available for retention by eligible employers include federal income taxes withheld from employees, the employees’ share of social security and Medicare taxes, and the employer’s share of social security and Medicare taxes with respect to all employees.
If the federal employment taxes yet to be deposited are not sufficient to cover the eligible employer’s cost of qualified leave wages, plus the allocable qualified health plan expenses and the amount of the employer’s share of Medicare tax imposed on those wages, the employer will be able file a request for an advance payment from the IRS. Eligible employers claiming the credits must retain records and documentation related to and supporting each employee’s leave to substantiate the claim for the credits. They also must retain Form 941, Employer’s Quarterly Federal Tax Return, and Form 7200, Advance of Employer Credits Due To COVID-19, along with any other applicable filings made to the IRS requesting the credit. In order to ensure that you take the right steps to secure these tax credits, we recommend that you speak with your accountant.