Client Alert: CARES Act Provides Further Guidance for Employers As to Paid Leave Obligations, Tax Credits
Date: March 27, 2020
The CARES Act also contains a number of provisions that are of direct concern to employers, as the Act includes a number of amendments to the paid leave provisions that were included in the recently enacted Families First Coronavirus Response Act (FFCRA). The FFCRA included two distinct employee leave provisions, each applicable to employers with 500 or fewer employees. Under the first, the Family and Medical Leave Act was expanded to provide up to twelve weeks of leave for employees who are unable to work due to a need to care for a minor child as a result of a school closure related to COVID-19. Under the second, employees may access up to two weeks of paid sick leave for a number of reasons, including the employee’s own illness and the need to care for a family member. The leave provisions of the FFCRA were the subject of a previous Whiteford Taylor alert, which can be accessed here.
The CARES Act modifies a number of the employee leave provisions contained in the FFCRA.
First, the CARES Act clarifies that the payment caps applicable to the FMLA and paid sick leave provisions contained in the FFCRA, which also determine the amount the employer can obtain in the form of payroll tax credits, apply on a per employee basis. This means that for each employee who uses the new FMLA leave benefit created by the FFCRA, the amount that an employer is obligated to pay is capped at $200 per day and $10,000 in the aggregate. For each employee who uses leave under the paid sick leave provision of the FFCRA, the cap will be either $511 per day ($5,110 in the aggregate) or $200 per day ($2,000 in the aggregate) depending on the reason the employee needs to use the leave.
Second, the CARES Act clarifies the eligibility provision governing FMLA leave under the FFCRA. The FFCRA provided that in order to be eligible for the new FMLA leave right, an employee had to have been employed by the employer for at least 30 days. That left open the question of how eligibility would be determined in a situation in which an employee was laid off and then later rehired. The CARES Act provides that an employee who has been rehired will not be deemed ineligible as a result of having been laid off any time after March 1st, provided that the employee had worked for the employer for at least 30 of the 60 calendar days immediately preceding the layoff.
Third, the CARES Act provides for advancement of the payroll tax credit amounts that an employer is eligible for as a result of paid leave provided to employees under the FMLA and paid sick leave provisions of the FFCRA. As set forth in materials published on the Department of the Treasury’s website, employers will be authorized to retain from depositing as part of their payroll tax deposits an amount equal to the amount of qualifying paid leave that was paid out to employees pursuant to the FFCRA. The IRS has published a new Form 7200 to claim the credit, which may be found here. Additionally, the statute specifically provides for the waiver of any penalty associated with the employer’s failure to deposit tax amounts that would otherwise be due so long as the Department of the Treasury finds that the failure to pay such amounts was in anticipation of the tax credits allowed under the FFCRA.
It is anticipated that further regulations and guidance will be issued by the federal government on an ongoing basis with regard to the obligations applicable to employers under the FFCRA and the CARES Act. Further information regarding new developments will be posted to Whiteford, Taylor & Preston’s COVID-19 employer FAQ page, which can be accessed here.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.