The Senate on March 18, 2020, approved by a 90-8 vote the Families First Coronavirus Response Act (H.R. 6201) to provide affected individuals with paid sick and family leave and create tax credits for affected employers, expand food and nutrition services, allow for emergency state unemployment insurance grants, and increase Medicaid funding to states, among other things. President Trump signed the bill into law on the evening of March 18, 2020.

The House had approved the measure on March 14, 2020, and corrections to the bill on March 16, 2020.

Highlights of the new law include:

• Emergency paid sick leave: Private sector employers with fewer than 500 workers and all public sector employers will be required to provide paid sick leave (two weeks for full-time employees and average hours over a two-week period for part-time employees) necessary (1) to respond to an isolation or quarantine order or advisory, (2) for those experiencing COVID-19 symptoms, or (3) to care for a family member or for a child whose school or place of care is closed due to a public emergency. The paid leave is capped at $511 per day / $5,110 in the aggregate for those on leave because of their own health issue, and $200 per day / $2,000 in the aggregate for those caring for others. The US Department of Labor (DOL) has authority to issue regulations to exempt small businesses with fewer than 50 employees.
• Emergency family and medical leave: Private sector employers with fewer than 500 workers and government entities must provide as many as 12 weeks of job-protected leave to employees to care for a child whose school or place of care is closed. The first 10 days could be unpaid, although a worker could choose to use other accrued leave. Employers will be required to pay employees two-thirds of their wages, not to exceed $200 per day / $10,000 in the aggregate. The Labor Department is authorized to issue regulations to exclude certain health care providers and exempt small businesses with fewer than 50 employees.
• Tax credits for paid sick and family and medical leave: Employers will receive a 100% refundable payroll tax credit on the wages required to be paid under such leave and additional health benefit contributions. Also, any additional wages paid due to the leave requirement will not be subject to the employer portion of Social Security/Medicare (FICA) tax.
• Unemployment insurance: As much as $1 billion will be provided for emergency transfers to states in fiscal 2020 to process and pay unemployment benefits. Individuals in states with rising unemployment can qualify for an additional 13 weeks (20 in some states) of unemployment benefits. States must meet certain stringent criteria to be eligible for federal grants under this provision, including the requirement that the benefits not be chargeable to employer accounts. These funds do not constitute Disaster Unemployment Assistance, which is funded directly by the federal government (and also not charged to employer accounts) in the event of a qualifying major disaster declaration.
• Increase in Medicaid funding: States receive a 6.2% Medicaid FMAP (federal Medicaid assistance percentage) increase for all medical services for the duration of the public health emergency.
• Other provisions: Food and nutrition assistance and funding for free testing are provided.

Ernst & Young LLP, insights

Pursuant to the employer tax credits for mandatory paid family and medical leave provided under this law, employers should expect Forms 941 and 941-X to both be redesigned to report payments exempt from the employer portion of FICA and to claim the 100% refundable federal tax credit for these payments.

The choice of law question is not yet clear for cases in which states also mandate paid leave (e.g., Colorado) in connection with COVID-19. Generally, where federal and state law apply, the employer chooses the law that is most favorable to the employee; however, regulations will be needed from the DOL to clarify.

Finally, the availability of federal grants for state unemployment insurance benefits creates a mechanism for states to address job loss due to COVID-19; however, not all states will adopt the provisions necessary for the federal grants, a fact that will create inconsistency in how states will administer unemployment claims in connection with COVID-19 related claims.

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