What the “CARES Act” Modifies in FFCRA
Note: The following is the Permanent Equity Legal Team’s analysis of the changes the Coronavirus Aid, Relief, and Economic Security (CARES) Act makes to the Families First Coronavirus Response Act (FFCRA). It is not legal advice. Consult your own legal resources before making decisions for your business.
As we previously detailed, on Wednesday, March 18, 2020, President Trump signed into law H.R. 6201, known as the Families First Coronavirus Response Act (the FFCRA). The material portions of the FFCRA included:
Emergency Family and Medical Leave Expansion Act (EFMLEA)
Extended the existing Family and Medical Leave Act of 1993 (more commonly known as FMLA) to require employers to provide up to 12 weeks of leave to an employee who is not able to work due to the need to care for such employee’s child because the child’s school or place of care has been closed, or such child’s care provider is unavailable, due to a COVID-19 public health emergency, as declared by any Federal, state, or local authority.
Emergency Paid Sick Leave Act (EPSLA)
Requires covered employers to provide up to 2 weeks of paid sick leave to any employee who is unable to work (or telework) due to any one of several COVID-19 related causes.
Payroll Tax Credits
Provides employers with refundable tax credits against payroll taxes, the amount of which is equal to 100% of the “qualified wages” paid by an employer under the EFMLEA and the EPSLA (Items I and II above) for each calendar quarter (subject to certain limitations).
Shortly after the enactment of FFCRA, Congress got back to work on providing additional support in response to the COVID-19 pandemic. This culminated On March 27, 2020 with the President signing the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). We have previously detailed some of its most material provisions. However, one element of the CARES Act that we have not addressed is the fact that it made a handful of slight changes to certain elements of the FFCRA. In our view, there are two amendments that you should be aware of:
Expansion of Eligible Employees Under the EFMLEA
As initially passed, the EFMLEA provided that all employees who have been employed for at least 30 days are eligible for up to 12 weeks of leave. This already represented a significant change to eligibility under traditional FMLA leave, which only applies to employees who have been employed for at least 12 months and have worked at least 1,250 hours during those 12 months.
Informed and influenced by the current upheaval in the labor market, the CARES Act tweaked and amended the eligibility standard under the EFMLEA to account for employees that have been recently rehired. As amended, eligible employees now includes an employee who:
was laid off by their employer after March 1, 2020;
at the time of such layoff, had worked for the employer for at least 30 of the prior 60 days;
and was then rehired by the same employer. The foregoing allows those who might have recently been laid off to still receive credit for and meet the 30 days of employment for eligibility purposes if they are subsequently rehired.
Advance Refunding of Tax Credits
We previously told you that the new payroll tax credits made available under the FFCRA are refundable, which is key. As a refresher, this means that to the extent the value of the credits received by an employer exceeds the amount of payroll taxes incurred by such employer, the excess amount of credit will be deemed an overpayment and refunded to the employer.
However, the CARES Act made an important revision to this, which has the ability to get the assistance created by these tax credits into the hands of business owners sooner. As revised under the CARES Act, if an employer anticipates that it will be entitled to the receipt of a tax credit, the employer now has the ability, per additional instructions to be provided by the Secretary of Labor, to advance the credit (including the refundable portion, if any) based upon and as calculated through the end of the most recent payroll period in the quarter.
In short, the employer receives the tax credit in real time. This is obviously much better than the traditional application of credits, which still requires tax payments up front with reimbursement following the application of the credits at the end of the taxable year.
