Overview
Last night, the US House of Representatives unanimously passed an enrollment resolution significantly amending the Families First Coronavirus Response Act it originally passed over the weekend (the "resolution"). The bill is now headed to the Senate for consideration, where its future remains uncertain as of this writing.
Reports indicate that drafting of a third relief package is also well under way, which is expected to target relief for certain industries, including the airlines, and could provide funding in the ballpark of $750-850 billion (or more). The White House and Senate Republicans are considering combining the House-passed bill with this stimulus package, creating one large package that the Senate could pass this week. Treasury Secretary Mnuchin said today that the Trump Administration was considering offsetting the economic burden of the coronavirus pandemic by "immediately" cutting checks to Americans.
The Treasury Department and the IRS separately announced that taxpayers can delay tax payments for up to 90 days. Individuals (and small businesses conducted through passthrough entities) can delay tax payments up to $1 million, and corporations can defer up to $10 million in tax payments.
Click here for Steptoe's March 16 summary of the House legislation.
Emergency Family and Medical Leave Expansion Act
The resolution makes some notable changes to the Emergency Family and Medical Leave Expansion Act, which is in Division C of the bill, including:
- A significant narrowing of circumstances in which coronavirus leave is triggered;
- Mandating paid FMLA leave after the first 10 days of coronavirus leave (rather than 14);
- Capping the maximum amount of paid coronavirus leave at $200 per day and $10,000 in the aggregate; and
- Allowing employers of health care professionals and emergency responders to exclude those employees from the new coronavirus leave structure.
The most significant change is that the definition of a "qualifying need" for leave is now limited to circumstances in which an "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." The original bill also included leave to comply with recommendations or order by a public official or health care provider or to care for a family member complying with a recommendation or order.
In another significant change from the original bill, the resolution adds a provision allowing (not requiring) employers of health care professionals and emergency responders to elect to exclude those employees from the new coronavirus leave provisions.
Emergency Paid Sick Leave Act
The resolution makes some significant changes to the Emergency Paid Sick Leave Act, in Division E of the bill. It continues to require virtually every private sector employer that employs fewer than 500 people as well as public employers (other than the military) to provide paid sick time in connection with COVID-19, but the resolution imposes dollar limits on the payments, distinguishes between the employee's illness and that of a family member, and gives the Secretary of Labor significant rule-making authority.[1]
The specific reasons allowed for the mandatory paid sick leave have also changed. First, sick leave must be paid "to the extent the employee is unable to work or telework" because the employee:
- Is subject to a quarantine or isolation order;
- Has been advised by a health care provider to self-quarantine;
- Is experiencing symptoms and seeking a medical diagnosis;
- Is caring for an individual who falls into (1), (2), or (3) above (the resolution does not limit these individuals to family members);
- Is caring for a son or daughter whose school or place of care has been closed or the child care provider is unavailable;
- Is experiencing similar conditions to any specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and the Treasury.
This last condition is new in the resolution and the entire section has been tightened up to require the employee to be unable to work or telework. As in the original bill, the employee may be required by their employer to provide reasonable notice in order to continue receiving paid sick leave.
The period of time and the amount of compensation taken into account is the same as in the original bill, but the resolution adds a dollar limit to the provision, specifying that in no event shall such paid sick time exceed $511 per day and $5,110 in the aggregate for the reasons described in items (1)-(3) above (employee illness) or $200 per day and $2,000 in the aggregate for the reasons described in items (4)-(6) above (another's illness or child care). There is a new special rule in the resolution that limits the required payment to two-thirds of an employee's regular rate of pay (subject to the dollar limits above) for care of family members.
The resolution deletes the provision in the original bill that provided that an employer may not change its sick leave on or after the date of enactment to avoid these requirements. Otherwise, the provisions governing enforcement of the paid sick leave requirements remain the same as in the original bill.
The resolution gives the Secretary of Labor authority to issue regulations to exclude certain health care providers and emergency responders from the definition of employee, and to allow their employers to "opt out." It also permits the Secretary to issue regulations that would exempt small businesses with fewer than 50 employees where "the imposition of such requirements would jeopardize the viability of the business as a going concern." Finally, the Secretary can issue regulations to carry out the purpose of the act, including consistency.
Health Provisions
The only change to the requirement for health plans to provide coverage for testing and other services related to the coronavirus is that the resolution now covers telehealth visits as services that result in an order to administer a diagnostic test.
Tax Credits for Paid Sick and Paid Family and Medical Leave
The resolution makes a few notable changes to the tax provisions in Division G.
First, the resolution expands the paid sick leave and paid family leave credit to cover employer's expenses attributable to providing a group health plan. The additional credit does not apply to self-employed individuals. The qualified health plan expenses are allocated to sick leave and family leave wages as determined by regulations to be issued by Treasury.
Second, the resolution adds a credit for the Medicare (HI) payroll taxes[2] paid on sick leave and family leave wages paid by the employer. This is different from the way the bill handles Social Security taxes, which is to exempt sick and family leave wages from the wage base. However, both rules are attempts to hold the employer harmless from the additional employer-side payroll taxes on the sick and family leave wages.
In addition, the resolution makes several more technical changes:
- Adds a payroll tax credit for amounts paid under the railroad retirement system, which is separate from Social Security.
- Flips the ordering rule to avoid double benefit, so that the section 45S credit for paid family and medical leave is reduced rather than the payroll tax credit allowed by the bill.
- Clarifies the computation of sick leave equivalent amount for self-employed individuals to count only 67% of average daily self-employment in the case of family leave credits (only sick leave related to the self-employed individual’s health is eligible for the 100% credit).
- Expands the definition of covered wages for paid sick leave and paid family to include compensation paid by an employer.[3]
- Expands Treasury's regulatory authority to ensure that wages taken into account for purposes of the payroll tax credit conform with leave required to be paid under the bill.
[1] The resolution changes the term coronavirus to COVID-19, the disease caused by the virus.
[2] Code section 3111(b).
[3] As defined in Code section 3231(e).
