What the Families First Coronavirus Response Act Means for Restaurants

In this guide, we answer your questions about what the Families First Coronavirus Response Act means for restaurant businesses.

The U.S. government has announced new rules enacting federal emergency paid leave for employees of certain businesses. In this guide, we answer your questions about what the Families First Coronavirus Response Act means for restaurant businesses.

This is for informational purposes only and is not legal nor tax advice. If you have specific legal or tax questions, you should consult your attorney or tax advisor, as appropriate. Participation in applicable provisions, programs, and tax benefits is subject to eligibility. Please consult with a licensed representative for additional information.

What is the Emergency Family and Medical Leave Expansion Act?

The Emergency Family and Medical Leave Expansion Act specifies that certain businesses must provide up to 12 weeks paid leave for employees who are not able to work due to their minor child’s school or care provider closing amidst the COVID-19 crisis, resulting in the employee’s need to care for their child.

How long is this leave available until?

The Emergency Family and Medical Leave Expansion Act specifies that certain businesses must provide up to 12 weeks paid leave for employees who are not able to work due to their minor child’s school or care provider closing amidst the COVID-19 crisis, resulting in the employee’s need to care for their child.

How long is this leave available until?

Emergency Family and Medical Leave is available from April 1, 2020, until December 31, 2020.

What employees are eligible to participate in this form of leave?

Eligible employees are those who have been employed for at least 30 calendar days by the employer the leave is being requested from.

What employers are required to comply with the provisions of this form of leave?

Employers with fewer than 500 full-time and part-time employees must comply with the requirements of the Emergency Family and Medical Leave Expansion Act, subject to exemption.

If an employee can telework, can they still participate in these leave benefits?

An employee must not be able to work, including telework, in order to avail themselves of this form of leave.

When must an employer start paying an employee who takes this leave?

If an employee participates in this form of leave, an employer is not required to pay an employee for the first 10 days of leave taken. However, an employee is able to use any accrued paid leave they have during that ten day period. Following that those initial ten days, employers must begin to compensate the employee with the appropriate leave payments.

How much must an employer pay an employee for this type of leave?

When an employer begins providing an employee with wages pursuant to this form of leave, the payments must be not less than two-thirds of an employee’s regular rate of pay for the number of hours per week that the employee normally works on average. Additionally, the maximum amount of compensation for this type of leave is $200 per day and $10,000 in total.

Occasionally, an employee will maintain a work schedule that varies to such a degree that their employer cannot definitively determine the number of hours the employee would have worked in an average week. In this scenario, the employer can average the number of hours that the employee was scheduled per day over the six months preceding the first day the employee takes leave to ascertain the correct number of hours for this calculation. An employer can also include the hours that an employee took any type of leave within this six-month calculation period. If you are paid with commissions, tips, or piece rates, these amounts may be incorporated into the above calculation to the same extent they are included in the calculation of the regular rate under the Fair Labor Standards Act. 

How far in advance must an employee inform an employer of their intention to take leave pursuant to this Act?

At any time when the need for leave may be foreseeable, the employee must inform their employer of the intention to take leave as soon as it becomes practicable.

Is an employer required to restore an employee’s prior position after leave ends?

Upon the employee’s return to work, an employer is generally required to restore an employee to their same or equivalent position that they had upon first beginning leave. However, this rule does not apply if the employer has fewer than 25 workers, the employee has actually taken the leave, and the employer has made reasonable efforts to retain the employee’s position or to contact the employee about an available equivalent position, but the position no longer exists due to economic hardship caused by the COVID-19 crisis.

Are there any exceptions to this type of leave?

If an employer has fewer than 50 employees and can show good cause that the viability of their business would be in jeopardy by meeting the requirements of this form of leave, an employer may be excluded from participating in providing this type of leave. Certain health care providers and emergency responders may also be excluded from participation in this type of leave.

What is the Emergency Paid Sick Leave Act?

The Emergency Paid Sick Leave Act requires eligible employers to provide paid sick leave to affected employees who are not able to work due to the effects of COVID-19.

How much leave is an employee entitled to under this Act?

A full-time employee is entitled to 80 hours of paid sick leave. The time can be used immediately, or when the employee is:

  • Required to isolate or quarantine by a governmental order;

  • Informed by a health-care provider that they should self-quarantine;

  • Experiencing symptoms of COVID-19 and is seeking a medical diagnosis;

  • Caring for another individual who is subject to governmental order, or is is in self-quarantine;

  • Caring for their child due to closure of the child’s school or child-care provider; and/or

  • Experienced other substantially similar circumstances from COVID-19.

A part-time employee is entitled to a prorated amount of paid sick leave which is dependent on the average number of hours that they work within a regular two week period.

What employers are required to comply with the provisions of this form of leave?

Employers with fewer than 500 full-time and part-time employees must comply with the requirements of the Emergency Paid Sick Leave Act, subject to exemption.

Are employees required to have worked a certain amount of days for an employer prior to participating in emergency paid sick leave?

The Emergency Paid Sick Leave Act does not require an employee to have worked for an employer for a certain period of time in order to participate in taking leave pursuant to it.

Can an employee participate in this form of leave if they are able to telework?

To qualify for this type of leave, an employee must not be able to work, nor telework.

Can paid sick leave hours be carried over to subsequent years?

Leave provided by the Emergency Paid Sick Leave Act is available starting April 1, 2020, and ends on December 31, 2020. Additionally, hours derived from the Act cannot be carried forward to subsequent years.

Can an employer require an employee to use another form of leave before this leave is utilized?

No, an employer cannot require employees to participate in any other form of leave prior to participating in paid sick leave.

Are employers required to inform employees of the leave available under the Emergency Paid Leave Act?

Employers are required to provide notice of the requirements of this form of leave in a conspicuous location by April 1, 2020.

Are employers required to comply with the requirements of this leave?

Subject to exemption, applicable employers are required to comply with the provisions of this Act and are prohibited from violating these regulations or taking adverse actions against employees who take paid sick leave pursuant to this Act. An employer can also not require an employee to locate or secure a replacement employee to cover work time while the employee is using their paid sick leave.

Are there any exceptions to this type of leave?

If an employer has fewer than 50 employees and can show good cause that the viability of their business would be in jeopardy by meeting the requirements of this form of leave, an employer may be excluded from participating in providing this type of leave. Certain health care providers and emergency responders may also be excluded from participation in this type of leave.

Are all employers required to provide this form of leave to employees?

Apart from exempt employers, all federal, state, and local public agencies, as well as any employers who have fewer than 500 employees are required to comply in providing paid sick leave to their employees.

How much must an employer pay an employee for this type of leave?

If an employee experiences COVID-19 symptoms, is subject to a governmental quarantine or isolation order, or is advised to self-quarantine by a healthcare provider, an employer must pay the employee’s regular rate of pay up to $511 per day, with a maximum amount of $5,110.

If an employee is unable to work because they must care for their child or another individual who is impacted by the crisis, an employer must pay the employee’s regular rate of pay up to $200 per day, with a maximum amount of $2,000.

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What are the Tax Credits for Paid Sick and Paid Family and Medical Leave?

Payroll Credit for Required Paid Sick Leave:

Employers who provide qualified sick leave wages each quarter pursuant to this Act and subject to limitations, are generally permitted to take a dollar-for-dollar credit of up to 100% against certain payroll taxes that are attributable to the sick leave wages they pay to their employees.

What is the maximum amount of an employee’s wages that the employer can seek to attribute a credit to?

If an employee experiences COVID-19 symptoms, is subject to a governmental quarantine or an isolation order, or they are advised to self-quarantine by a healthcare provider, an employer must pay the employee’s regular rate of pay up to $511 per day.

If an employee is unable to work because they must care for their child or another individual who is impacted by the crisis, an employer must pay the employee’s regular rate of pay up to $200 per day.

What is the maximum amount of days of paid sick leave that an employer can seek a credit for?

The sick leave payroll credit covers 100% of paid sick leave wages for up to ten days in a calendar quarter.

What are qualified sick leave wages that the employer can attribute this payroll credit to?

Qualified sick leave wages are wages and compensation that an employer is required to pay to an employee pursuant to the Emergency Paid Sick Leave Act. Businesses can also factor in certain qualified health plan expenses and the employer’s share of Medicare tax that is imposed on those wages when calculating the appropriate amount of qualified wages.

How long can employers utilize this payroll credit?

The payroll tax credit for required paid sick leave is available only with respect to wages paid from April 1, 2020, to December 31, 2020.

Can employers receive this tax credit in addition to tax credits provided under the CARES Act?

Employers who meet the requirements for the employee retention credit may also receive the credit provided for qualified paid leave wages. However, the credits must not be attributed to the same wage payments and may be subject to additional criteria.

Can employers receive this tax credit in addition to a SBA loan under the CARES Act?

Eligible employers can receive a tax credit for qualified leave wages in addition to receiving assistance from a SBA loan. However, qualified leave wages are not deemed to be “payroll costs” that qualify for loan forgiveness pursuant to the CARES Act.

When can employers start claiming the benefit from these tax credits?

Employers can claim applicable credits on their Form 941, or seek immediate funding of these credits by reducing their federal employment tax deposits by the qualifying amount of the credit.

Additionally, employers can request advance payments of the applicable credits by submitting a Form 7200 to the IRS.

Are employers required to maintain any type of records regarding the credits?

Employers are required to maintain any and all:

  • Records and/or documentation that relate to and support each employee’s leave substantiating the applicable credit,

  • Forms 941,

  • Forms 7200 (if applicable), and

  • Any other additional filings made to the IRS that relate to a request for the credit.

What happens to the excess amount of the credit, if the applicable credit amount exceeds the employer portion of federal employment taxes?

Excess amounts are treated as overpayments and are refunded to employers.

Credit for Sick Leave for Certain Self-Employed Individuals:

Self-employed individuals who would also be entitled to paid leave under the Emergency Paid Sick Leave Act may also be eligible for a payroll tax credit for a qualified sick leave equivalent amount paid.

What self-employed individuals are eligible for this payroll credit?

An eligible self-employed individual is one who has been carrying on business in 2020, and who would otherwise be eligible for taking leave if they were an employee working for an applicable employer instead of self-employed.

What is a qualified sick leave equivalent amount?

A qualifying sick leave equivalent amount is the number of applicable days during a taxable year that the individual is unable to perform services in their business due to the above-referenced COVID-19 circumstances.

For self-employed individuals, the amount of tax credit that an employer can seek is the lesser of:

  • If a self-employed individual experiences COVID-19 symptoms, is subject to a governmental quarantine or isolation order, or is advised to self-quarantine by a healthcare provider, they can attribute the credit to up to $511 per day of applicable qualified wages paid.

  • If a self-employed individual is unable to work because they must care for their child or another individual who is impacted by the crisis, they can attribute the credit to up to $200 per day of applicable qualified wages paid.

OR

  • If a self-employed individual experiences COVID-19 symptoms, is subject to a governmental quarantine or isolation order, or is advised to self-quarantine by a healthcare provider, they can attribute the credit to up to 100% of average daily self-employment income for the taxable year.

  • If a self-employed individual is unable to work because they must care for their child or another individual who is impacted by the crisis, they can attribute the credit to up to 67% of average daily self-employment income for the taxable year.

How is the average daily self-employment income amount determined?

The average daily self-employment income amount is the net earnings the self-employed individual obtains for the taxable year, divided by 260.

How long can employers utilize this payroll credit?

The payroll tax credit for required paid sick leave is available only with respect to wages paid from April 1, 2020, to December 31, 2020.

Payroll Credit for Required Paid Family Leave:

Employers who provide qualified family leave wages each quarter pursuant to this Act and subject to certain limitations, are generally permitted to take a credit against payroll taxes for 100% of wages paid.

What is the maximum amount of an employee’s wages that the employer can seek to attribute a credit to?

An employer can seek a 100% tax credit for up to $200 that is paid to an employee in qualified family leave wages, with a maximum amount of $10,000 for all calendar quarters.

What are qualified family leave wages that the employer can attribute this payroll credit to?

Qualified family leave wages are wages and compensation that an employer is required to pay to an employee pursuant to the Emergency Family and Medical Leave Expansion Act. Businesses can also factor in certain qualified health plan expenses and the employer’s share of Medicare tax that is imposed on those wages when calculating the appropriate amount of qualified wages.

What is the maximum amount of days of paid family leave that an employer can seek a credit for?

The family leave payroll credit covers 100% of paid family leave wages for up to ten weeks in a calendar quarter.

How long can employers utilize this payroll credit?

The payroll tax credit for required paid family leave is available only with respect to wages paid from April 1, 2020, to December 31, 2020.

Can employers receive this tax credit in addition to tax credits provided under the CARES Act?

Employers who meet the requirements for the employee retention credit may also receive the credit provided for qualified paid leave wages. However, the credits must not be attributed to the same wage payments.

Can employers receive this tax credit in addition to a SBA loan under the CARES Act?

Eligible employers can receive a tax credit for qualified leave wages in addition to receiving assistance from a SBA loan. However, qualified leave wages are not deemed to be “payroll costs” that qualify for loan forgiveness pursuant to the CARES Act.

When can employers start claiming the benefit from these tax credits?

Employers can claim applicable credits on their Form 941, or seek immediate funding of these credits by reducing their federal employment tax deposits by the qualifying amount of the credit.

Additionally, employers can request advance payments of the applicable credits by submitting a Form 7200 to the IRS.

Are employers required to maintain any type of records regarding the credits?

Employers are required to maintain any and all:

  • Records and/or documentation that relate to and support each employee’s leave substantiating the applicable credit,

  • Forms 941,

  • Forms 7200 (if applicable), and

  • Any other additional filings made to the IRS that relate to a request for the credit.

What happens to the excess amount of the credit, if the applicable credit amount exceeds the employer portion of federal employment taxes?

Excess amounts are treated as overpayments and are refunded to employers.

Credit for Family Leave for Certain Self-Employed Individuals:

Self-employed individuals who would also be entitled to paid leave under the Emergency Paid Family Leave Act may also be eligible for a payroll tax credit for a qualified family leave equivalent amount paid.

What self-employed individuals are eligible for this payroll credit?

Eligible self-employed individuals are those who are regularly carrying on in a trade or business and who would otherwise be entitled to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act if they were an employee of an employer instead of a self-employed individual.

What is a qualified family leave equivalent amount?

The qualified family leave equivalent amount is the number of days during the taxable year that an individual is unable to perform services for the business due to a qualified COVID-19 circumstance, multiplied by the lesser of: 67% of the individual’s average daily self-employment income for the taxable year, or $200. The amount of days accounted for may not exceed 50 days.

How is the average daily self-employment income amount determined?

The average daily self-employment income amount is the net earnings the self-employed individual obtains for the taxable year, divided by 260.

How long can employers utilize this payroll credit?

The payroll tax credit for required paid sick leave is available only with respect to wages paid from April 1, 2020, to December 31, 2020.

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