On March 18, 2020, the federal government passed emergency legislation to support businesses and employees during the COVID-19 pandemic. Beginning Thursday, April 2, 2020, employees will be able to access new, temporary paid leave if they are absent from work because of COVID-19, including to care for children due to school closures. Employers may use new tax credits to offset these wages.
In addition, the Minnesota state government changed the eligibility rules to provide unemployment insurance benefits for those unable to work because of COVID-19. We will provide additional updates on these programs and preliminary guidance regarding small business loan assistance in the coming days.
Two Types of New, Temporary Paid Leave for Employees under Federal Law
The new federal law creates two types of paid leave specifically related to COVID-19: paid sick leave and an expansion of the Family and Medical Leave Act (FMLA), with partially paid leave.
FEDERALLY MANDATED COVID-19 PAID SICK LEAVE
To whom does paid sick leave apply?
- Employers with 1-499 employees must offer 80 hours (or 10 days) of paid sick leave for COVID-19-related issues.
- Any employee is eligible, including full-time, part-time, temporary, or probationary, paid interns, union employees, and new hires.
- Independent contractors are not eligible.
Recommendation: Contact your payroll provider as soon as possible to see if they will track employees’ use of paid sick leave for the COVID-19 reasons specified below. If your payroll provider will not track this leave, you should set up a system to do so. Such a system will be critical to maximize your reimbursement through the tax credits described below.
How much paid sick leave does an employee get?
- Full time: 80 hours (or 10 days) of paid leave.
- Part time: the typical number of hours that the employee works in a typical two-week period.
- Leave is “frontloaded” to employees on April 2, 2020; it does not accrue over time.
- Leave must be used on or before December 31, 2020. Unused leave will not carry over to 2021.
- This paid sick leave is in addition to any PTO provided by their employer or any earned sick or safety time they receive under the Minneapolis, St. Paul, or Duluth ordinances.
Recommendation: Employers do not get a credit for any paid sick leave they voluntarily provided to employees affected by COVID-19 prior to April 2, 2020. Employers should keep this in mind as they consider whether to provide paid or unpaid time off during the next two weeks.
Employees can use this COVID-19 paid sick leave only for six reasons:
- Employee is subject to federal, state, or local quarantine or isolation order related to COVID-19;
- Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- Employee is caring for an individual who a) is subject to federal, state, or local quarantine or isolation order related to COVID-19 or b) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- Employee is caring for their child because of school or daycare closure or the unavailability of childcare due to COVID-19; or
- Employee is experiencing a “substantially similar condition” that will be specified later by federal government agencies – this is essentially a placeholder for future government action.
Recommendation: Employers are not required to receive a doctor’s note to certify the employee’s need for leave.
How much is an employee paid for sick leave?
- Full-time: paid at their regular rate of pay, capped at $511 per day, if absent because of reasons 1-3 above.
- Part-time: paid at their regular rate of pay for the average hours they work over a two week period if absent because of reasons 1-3 above.
- Full-time and part-time employees are paid 2/3 their regular rate of pay, capped at $200 per day, if absent because of reasons 4-6 above.
How will employers pay for it?
- Employers get a tax credit against Social Security taxes for the wages they are required to pay under the federal law. If the credit amount exceeds the employer’s total Social Security tax liability, the employer gets the difference as a refund.
- The Department of the Treasury has authorized the IRS to provide loan assistance to businesses without cash on hand to pay out sick leave. We do not yet have details regarding the mechanics of these loans.
Recommendation: To maximize tax credits, employers should require employees who qualify to take this paid leave to use the federally mandated paid sick leave before using any PTO or other paid time off.
NEW COVID-19 EXPANSIONS OF FMLA BENEFITS
The existing FMLA provides 12 weeks of unpaid leave to employees to care for their own serious medical issue; to care for a family member with a serious medical issue; or for parental leave or pre-natal medical care. The existing law remains in effect for medical issues not related to COVID-19, and has been expanded to provide partially paid leave to employees during the COVID-19 pandemic.
To whom does the COVID-19 FMLA apply?
- COVID-19 FMLA applies to employers with 1-499 employees.
- Employers with fewer than 50 employees may be exempt because of financial hardship. We do not yet have details as to the mechanics of this exemption. Contact us if you believe your company may qualify for the exemption.
- Any employee who has been on the employer’s payroll for 30 days is eligible.
Recommendation: Because COVID-19 FMLA has less strict length-of-service and geographic restrictions than the existing FMLA, COVID-19 FMLA covers more employees. Employers not covered by the existing FMLA may have obligations under COVID-19 FMLA. If the existing FMLA does not apply to you, please contact us to determine any obligations under COVID-19 FMLA.
How much COVID-19 FMLA leave does an employee get?
- Up to 12 weeks for all employees.
- Again, make sure to track how much paid leave you provide to employees in order to maximize your tax credit reimbursement.
Employees can use COVID-19 FMLA leave for only one reason:
- Employee needs to care for their child because their school or daycare is closed, or their childcare provider is unavailable, because the federal, state, or local government has declared a public health emergency for COVID-19.
Recommendation: Employees may qualify for unpaid leave under the existing FMLA, but not COVID-19 FMLA, if they or their family experience complications from COVID-19.
How much is an employee paid under the COVID-19 FMLA and how will employers pay for it?
- Employees may use up to 12 weeks of leave.
- The first two weeks are unpaid. However, employees may substitute federal paid sick leave, earned sick and safety time (for Minneapolis, St. Paul, or Duluth) or company-provided PTO to receive pay during those two weeks. Employers cannot require employees to use PTO during those two weeks.
- The remaining 10 weeks are paid by the employer at 2/3 the employee’s regular rate of pay, for the number of hours the employee would have normally worked, capped at $200 per day.
- Similar to the new paid sick leave, employers get a tax credit against Social Security taxes for the wages paid under COVID-19 FMLA. If the total credit amount exceeds the employer’s total Social Security tax liability, the employer gets the difference as a refund.
NEW UNEMPLOYMENT BENEFITS AVAILABLE TO MINNESOTA EMPLOYEES
Employees are now eligible for unemployment insurance benefits when:
- A healthcare professional or health authority recommended or ordered them to avoid contact with others;
- They have been ordered not to come to work because of an outbreak of COVID-19.
- They cannot work because they need to provide care to their child due to school or daycare closure, or the unavailability of their childcare, as long as the employee made reasonable effort to obtain other childcare, has no PTO available, and no reasonable accommodation is available from their employer.
Easing of eligibility requirements for COVID-19-related unemployment:
- The standard “one-week wait period” is waived for COVID-19-related unemployment.
- Employees who are furloughed or laid off because of COVID-19 do not need to be actively looking for new work. Employers should stay in contact with furloughed employees with potential timelines to bring them back to work.
Additional unemployment benefits for employers:
- Employers that furlough or lay off employees because of COVID-19 will not face increased unemployment taxes.
- Business owners who become unemployed are eligible for unemployment insurance benefits.