Governor Wolf announced that Pennsylvania construction companies will be permitted to resume operations beginning May 1, one week ahead of schedule, provided they adhere to the Administration’s guidance.

The Governor’s guidelines include, among other things, strict social distancing measures (unless employee or public safety requires a deviation); requirements to provide handwashing stations at building entrances, break areas, food truck areas, offices, trailers, and exits; implementation of cleaning or sanitizing protocols; limiting gatherings of workers to no more than 10 people (while maintaining social distance); staggering shifts and break times; limiting tool sharing; prohibiting unnecessary visitors and carpooling; and designating a Pandemic Safety Officer.

According to the Administration’s guidance, in-person activities will be permitted if businesses follow all applicable provisions of the worker safety and building safety orders issued by the Secretary of Health, as well as all applicable Department of Health and CDC guidance. In addition, local public entities may impose stricter guidelines that may apply in those jurisdictions.

The Administration’s guidance distinguishes between residential and commercial construction projects. Residential construction projects are limited to only four persons on a job site at one time (exclusive of delivery persons, code inspectors, or similar persons not directly engaged in the project who may require temporary access).

On the other hand, for non-residential or commercial construction, the four-person limit applies only on enclosed or portions of enclosed projects on job sites of 2000 square feet or less. One additional person is permitted for each additional 500 square feet of enclosed area over 2000 square feet.

Notably, for both residential and non-residential or commercial construction projects, the four-person limit relates to workers regardless of their employer.

Commercial construction firms are also encouraged to establish written “Safety Plans” for each work location. These should contain site-specific details for implementing the Administration’s guidance to be shared with all employees and to be enforced by the company’s Pandemic Safety Officer.

Under the guidance, local political subdivisions and municipalities are encouraged to balance public health and safety while ensuring the continued safety of public infrastructure, and are encouraged to follow the Governor’s guidance on public construction projects.

It is important to remember that this guidance put forth by the Commonwealth is subject to change as the situation continues to evolve.

For any questions or concerns about implementing policies or procedures to maintain operations beginning May 1, contact any member of the McNees Labor & Employment or Construction Law groups.

I-9 Form

With all the changes to business operations due to COVID-19, it is still important that we pay attention to the non-COVID-related changes that continue to occur in the employment world.  The new I-9 form has been around since January 31, 2020, and its use has been voluntary until now.  As you know, however, the use of the new I-9 form will be mandatory as of May 1, 2020.  The new form is available in electronic format like previous I-9s.  The forms may be maintained in electronic and paper formats.  The date on the new version of the form is 10/21/2019 and is located in the lower left corner of the form.  A revised Spanish version of the form is available but may only be used in Puerto Rico.

Some of the changes on the new form include changes to the country of issuance field in Section 1.  The issuing authority field in Section 2, which is used when selecting a foreign passport, now includes Eswatini and Macedonia North, reflecting recent name changes to those countries.  Those changes are only visible when using the electronic form.  The instructions for completing the I-9 form have also been revised.  They now reflect clarification on who can be the authorized representative for employers, an updated web address for USCIS, clarifications on acceptable I-9 documents, and updated process for requesting paper forms, and an updated DHS privacy notice.  We strongly recommend that employers use electronic I-9s where possible.  The e-form greatly reduces the chances of errors on the form and totally eliminates some of the minor issues, like date formats that have plagued employers for years.

Temporary Flexibility in Verifying Documents Under Section 2

You likely know by now that, due to the precautions implemented regarding COVID-19, employers are not required to review the employee’s documents in the presence of the employee.  Documents are reviewed remotely by video, fax, e-mail or other methods.  Employers must obtain a copy of the documents within 3 business days.  When completing Section 2 using this method, answer “COVID-19” as the reason for not physically reviewing the documents into the additional information field. Once the documents are physically inspected, the employer should add “physical inspection” with a date in the same field.  This change will remain in effect until May 18th, or 3 days after the termination of the National Emergency, whichever comes first.  Employers may only use this method where employees are working remotely. If the employer has employees physically present on site, this process is not available.  Once normal work resumes, the employee must present himself to the employer within 3 business days for physical inspection and verification of the documents.  Employers will be responsible to maintain written procedures for telework and onboarding for each employee.

Contact McNees Labor & Employment Group for all of your questions regarding I-9s.

Governor Wolf has unveiled further details about his administration’s plan to reopen the Pennsylvania economy, as hopes persist that the pandemic is losing steam. The administration will use a “three-phase matrix” to determine when counties and/or regions around the Commonwealth are ready to begin easing restrictions on work, congregate settings, and social interactions.

The administration will base its decision to move a county or region from one phase of reopening to the next based a variety of economic and public health data. These will include the incidence rate of COVID-19 per capita; the adequacy of testing in the region; the region’s capacity to contact-trace, identify cluster outbreaks, and issue proper isolation and quarantine orders; and identification of “high risk settings” in the region, such as correctional institutions and skilled nursing facilities, and ensuring such facilities have necessary safeguards in place to support continued operations while still implementing mitigation measures.

The administration will also examine the business and industry sectors within a region to evaluate the risks and benefits of reopening, such as worker exposure and spread risks, health care capacity, and supply chain impact.

The three phases – aptly labeled Red, Yellow, and Green – are comprised of progressively loosening restrictions until a semblance of relative normalcy is reached.

The Red Phase is the current status quo in the entire state. This, of course, involves the closure of all non-life-sustaining businesses, closure of schools for in-person instruction, and the closure of most childcare facilities. The Red Phase also includes the statewide Stay-at-Home Order, prohibition on large gatherings, dine-in restaurants, and non-essential travel.

The Yellow Phase will involve slowly easing work restrictions and social interactions. Businesses with in-person operations will be required to follow strict guidelines for density and safety procedures, in addition to implementing the Worker Safety and Building Safety orders that were previously issued. Telework must also continue where it is feasible.

The Yellow Phase will also involve the lifting of the Stay-at-Home Order (replaced by “aggressive mitigation”), but large gatherings of more than 25 people will be prohibited. In-person retail will be permitted, with curbside and delivery preferable, while gyms, spas, casinos, theaters, and the like will remain closed. Bars and restaurants will continue to be limited to carry out or delivery.

Then, finally, the Green Phase. According to the administration, this will involve an easing of “most restrictions” by lifting the stay at home and business closure orders to “strategically reopen” the economy while continuing to prioritize public health. Even during this phase, however, all individuals must follow CDC and Department of Health guidelines.

The administration indicates it will develop guidance for businesses and local governments to follow as the reopening process unfolds. In addition to other requirements, like businesses ensuring adequate personal protective equipment (PPE) and naming a Pandemic Safety Officer to ensure company compliance with COVID-19 related safety procedures, employers will be required to display a Commonwealth-created “COVID-19 Safety Procedures for Businesses” flyer, along with its other posters.

This regulatory landscape is sure to continue to rapidly develop as businesses and the Commonwealth move toward reopening. The McNees Labor & Employment Group remains available to provide assistance.

Over the past several weeks, human resources and employee benefits professionals (and their attorneys) have been scrambling to assemble staffing plans, telework arrangements and strategies for complying with the paid leave provisions in the Families First Coronavirus Response Act (“Response Act”).  However, amidst the flurry of new laws, guidance and blog articles landing in your in-box, it’s important to keep in mind how longstanding compliance requirements apply to the current situation.  This article briefly addresses some of the fundamental benefits questions that employers are asking as they navigate these challenging times.

Must we continue health coverage for employees who have been subject to a temporary layoff or a reduction in hours?  Apart from COBRA and Pennsylvania’s “Mini-COBRA” law, no federal or Pennsylvania law requires employers to continue group health coverage during a period of layoff or reduced hours that would otherwise render the employee ineligible for coverage under the plan.  However, employers that use the “look back measurement period” approach for determining full-time status of employees under the Affordable Care Act (ACA), could be subject to a penalty if they terminate coverage for existing full-time employees (including those laid off or subject to a reduction of hours) while those employees are in a “stability period”.  On the other hand, employers that wish to continue coverage for employees during a period of layoff or reduced work hours may run into trouble with their insurer (or reinsurer) if their plan does not allow for continuing coverage in these circumstances.  These are complex issues that are beyond the scope of a brief article.  However, there are ways to manage these competing compliance concerns.  Employers considering a layoff or a broad reduction in hours should sort through these issues before proceeding.

Must we continue health coverage for employees who take a leave of absence during the pandemic?  It depends.  If the absence is covered by the FMLA (including the new paid leave available under the Response Act), then coverage must be continued unless the employee elects not to do so.  Likewise, some states (not PA) have passed laws requiring continued coverage in other circumstances.  Employees who take other types of leave that are not protected by law may or may not be entitled to continue coverage depending on their employer’s leave policy and terms of their health plan.

May an employer help an employee pay for COBRA continuation coverage?  It’s not uncommon for employers to assist employees with the cost of COBRA during periods of layoff.  However, if the employer offers a self-insured health plan, COBRA subsidies should not be offered in a manner that discriminates in favor of highly compensated individuals either in terms of the subsidy amount or duration.  Offering subsidies on a discriminatory basis could jeopardize the favorable tax treatment afforded to plan benefits.

What options are available for laid off or terminated employees who can’t afford COBRA?  Individuals in this circumstance should investigate their eligibility for a tax credit to purchase coverage on the ACA Exchange.  In addition, eligible individuals should explore coverage options under a spouse’s or parent’s plan as well as CHIP, Medicare or TRICARE (for veterans).  It would also be advisable to consult with an insurance broker to see if there are other low cost coverage options available.

May employees change benefit elections under a cafeteria plan due to recent events?  If a cafeteria plan allows for mid-year election changes due to qualifying changes in status, the COVID-19 pandemic may trigger a number of permitted changes.  Employees may be permitted to add dependents to their health coverage who have lost other coverage due to layoff.  Employees may be permitted to drop their coverage due to a reduction of hours.  Similarly, elections for dependent care costs may be altered due to a change in the employee’s daycare cost (i.e. parent is now at home and caring for child).  Plans that don’t allow for mid-year changes may need to be amended if an employer wishes to allow for certain adjustments.  However, if a carrier allows for employees to enroll mid-year (due to a spouse losing coverage) any employee contributions for such coverage would need to be on a post-tax basis through the end of the plan year.

Must our health plan cover the cost of COVID-19 testing?  Yes, the Response Act requires all employer-sponsored plans (including high deductible health plans) to cover diagnostic in-vitro testing for COVID-19 and related service costs at no expense to the participant.  This may require a plan amendment and issuance of a summary of material modifications (“SMM”) to participants.

This is not the first pandemic to hit the US.  However, never before have businesses had to balance so many regulatory requirements while navigating the other challenges that a pandemic poses.  We hope this brief overview of some of the health coverage issues to consider is helpful in this regard.  If you need further information regarding this article or any aspect of pandemic preparedness, please contact any member of our Labor and Employment Practice Group.

In the midst of the COVID-19 pandemic, the Occupational Health and Safety Administration (“OSHA”) saw fit to remind employers that it remains illegal to retaliate against workers who report unsafe and unhealthful working conditions, including workplace issues related to COVID-19.

Generally, the whistleblower provision of the Occupational Safety and Health Act, and similar state whistleblower laws, prohibit employers from taking adverse action against employees who engage in protected activity related to the safety of the workplace. The Act provides protections to employees who reasonably and in good faith exercise rights under the Act. This could include, for instance, reporting a work-related illness, requesting access to health and safety records, or expressing safety and health concerns to a manager or supervisor, among other things.

As the public health recommendations and legal requirements surrounding COVID-19 continue to quickly evolve, an employer’s duty to provide a hazard-free workplace is increasingly difficult. In addition to that obligation, employers must also be mindful of the potential consequences of taking adverse action against employees who may speak up in the face of a perceived threat.

Employers should also consider this enforcement provision as they plan reductions in the workforce, furloughs, and other measures to mitigate the economic impact of the COVID-19 pandemic.

For assistance with addressing issues related to workplace safety, managing a retaliation claim, or other related issues, we are here to help.  Please contact any member of our Labor and Employment Group for assistance; we remain available to assist you 24/7 as the need arises.

Special thanks to McNees attorneys Steve Matzura and Errin McCaulley for contributing to this post.

On April 5, 2020, the Pennsylvania Department of Health released an Order requiring businesses with in-person operations during COVID-19 to adopt and implement certain safety measures. Businesses covered by the Order include those with facilities of at least 50,000 square feet used for “commercial, industrial or other enterprises” that are either life-sustaining businesses or have been granted an exemption from the Governor’s March 19, 2020 closure order. The Order went into effect on April 6, 2020.

Businesses covered by the Order must adopt and implement certain cleaning protocols to help mitigate the spread of COVID-19, including routine disinfection of high-touch areas in accordance with guidance from the Centers for Disease Control.  In addition to complying with the Order, businesses should remain aware of the various workplace standards enforced by the Occupational Safety and Health Administration (“OSHA”). Notably, businesses should review their operations for compliance with OSHA’s sanitation standard, such as by ensuring employee access to potable water and washing facilities necessary for personal hygiene.

While implementing the safety measures in the Order, businesses should be careful not to introduce or create additional workplace hazards. For example, businesses should consider OSHA’s requirements for walking-working surfaces to mitigate the potential slip, trip, and fall hazards created by increased cleaning activities.  Depending on the nature of a business’s operations, additional OSHA standards may be implicated when implementing the safety measures.

For assistance in addressing any environmental, health, and safety issues, please contact any member of our Labor & Employment Group, Steve Matzura, or Errin McCaulley.

This post is brought to you by Tim Finnerty, Nicole Kaylor, David Noll and Ben Ward of the McNees Corporate & Tax Practice Group

With guidance from the Small Business Administration (“SBA”) and the Internal Revenue Service (“IRS”) still forthcoming, and the existing guidance changing, many businesses are struggling to understand their options under the Coronavirus Aid, Relief and Economic Security Act (“Act”).  We previously published guidance on the Payroll Protection Program (“PPP”) and Disaster Relief Loans which can be found here.  In addition to those loan offerings, the Act also created other relief options for businesses, some of which can be used in conjunction with the PPP loans.

Employee Retention Credit

First, the Employee Retention Credit is available to employers (i) for so long as operations have been fully or partially suspended by government order relating to COVID-19 or (ii) if gross receipts are down 50% or more from receipts in the same calendar quarter of last year, in which case the credit will continue until the business’s receipts exceed 80% of the corresponding quarter in the previous year’s receipts.  Special rules apply to tax-exempt organizations.  No business accepting a PPP loan is eligible to take this credit, but those that are eligible will receive a credit equal to 50% of the “qualified wages” with respect to each employee in each applicable calendar quarter, up to a maximum of $10,000 in wages per employee over all eligible quarters.  For purposes of this credit, “qualified wages” means wages and compensation (as defined in the Internal Revenue Code) paid between March 12, 2020 and January 1, 2021 (i) for employers of over 100 employees, wages to employees not providing services as a result of the events qualifying the employer to take the credit, and (ii) for employers of less than 100 people, (a) all wages paid as a result of a complete or partial closure, or (b) wages paid in a calendar quarter in which the employer qualifies due to a reduction in receipts, and such amount, regardless of how arising hereunder, includes the amount paid or incurred by the employer for any group health plans.  If an employer takes this credit and later applies for and receives a PPP loan, the employer will have to recapture the credit taken or utilize other withheld taxes that will be required to be paid to the IRS. The IRS has issued a very helpful FAQ concerning this process which can be found here.

Credits may not be claimed for any increase in wages over those paid in the 30 days prior to eligibility.  The amount of the credit is then reduced by the amount of sick and family leave credits available under the Families First Coronavirus Relief Act (“FFCRA”) and credits would be negated if certain duplications of deductions arise in limited circumstances.  Since passage, the IRS clarified the reduction for FFCRA credits would be only to the extent such wages are counted in duplication, but both credits would be available to the extent the employer has both paid leave wages refunded under the FFCRA and wage credits under the Employee Retention Credit.

Employers are also eligible, in some circumstances, to request an advance payment of their credit.  The credit can first be taken as a reduction against any tax deposits for the applicable quarter, but may then file a Form 7200 to claim the refund in advance.

Delay in Payment of Employer Payroll Taxes

The Act also authorizes the delay in employers paying their social security tax for the period of March 26, 2020 (the date of the Act’s passage) to December 31, 2020.  One half of the deferred taxes would then be due at the end of 2021 and the other half at the end of 2022.  The Act further provides limited relief for self-employment taxes for self-employed individuals, with 50% payable as usual and the remaining 50% payable in 25% increments at the end of each of 2021 and 2022.  The above deferrals are all available without penalty and as immediate offsets to amounts due.  Finally, as with the Employee Retention Credit, this deferral is not available for employers receiving forgiveness of a PPP loan or a related loan arising under Section 1109 of the Act; however, there is no such prohibition for self-employed individuals.  There is an open question as to whether employers are permitted to defer their social security taxes for the period after securing a PPP loan, but before any forgiveness of the loan.  There will likely be future guidance forthcoming on this and many other open issues under the Act.

The McNees Corporate & Tax Practice Group are continuing to follow guidance issued by the IRS on these matters. Please reach out to any member of the Corporate & Tax Practice Group with questions about the tax changes discussed in this article or other elements of the CARES Act.

Yesterday, the Families First Coronavirus Response Act (FFCRA) became effective, granting eligible employees emergency paid sick leave and emergency paid family leave in response to COVID-19.  On the same day, after weeks of employers (and their attorneys) attempting to decipher the nuances of the leave requirements, the Department of Labor (DOL) issued temporary regulations, shedding light on many of the darkest and unknown corners of the law.

For example, we now know that the emergency paid sick leave (80 hours) runs simultaneously with the first ten days of emergency family leave.  We also know that the emergency paid family leave is not in addition to the twelve weeks of traditional FMLA – employees have 12 weeks total to use for traditional and/or COVID-19 qualifications, not 24.  Yet, employers are more focused on the immediate issue of determining what procedures and documentation they can require to avoid abuse and ensure that they have sufficient information to receive the tax credit.

The temporary regulations give us some answers.  First, the employer can require reasonable notice procedures and generally can require the employee to comply with its usual and customary notice and procedural requirements for requesting leave.  However, there are limitations.  Employers cannot require notice to be given in advance of the leave, it can only be required after the first workday (or part of workday) for which the employee takes the paid leave.  Thereafter, employers can require notice as soon as practicable.  An employer can require the content of the notice, which can be oral, to contain sufficient information determine that the leave is qualifying for paid sick or paid family leave.

An employer can also require supporting documentation.  Regardless of whether the employee is taking paid sick leave or paid family leave, the employee is required to provide documentation containing following: (1) his/her name; (2) dates for which leave is requested; (3) qualifying reason for leave; and (4) a statement that the employee is unable to work because of a qualified reason.  The documentation requirements do not end there.  Additional documentation is required depending upon the basis for the leave.  With respect to paid sick leave, if the employee is taking paid sick leave based on a quarantine or isolation directive (either from the government or a health care provider), he/she must provide the name of the governmental entity or the health care provider that issued the directive.  If the employee simply takes leave under traditional FMLA for their own serious health condition (or to care for the employee’s spouse, child, or parent with a serious health condition) related to COVID-19, the normal FMLA certification requirements apply.

Given that most (if not all) schools and childcare facilities are closed, the most prevalent need for paid sick and family leave will likely be related to childcare.  If the basis for paid sick and paid family leave is childcare, the employee must provide: (1) the name of the son or daughter; (2) the name of the school or place of care that has closed; (3) and a representation that no other suitable person will be caring for the son or daughter during the period of leave.  This last requirement will help avoid the situation where both parents are utilizing paid sick and paid family leave, while only one is needed to care for their children.  Finally, the regulations allow employers to request additional documentation that will be needed to support a request for tax credits for providing the leave.

Enter the IRS.  The IRS issued its own guidance related to seeking the tax credits, and if you thought that the IRS was not going to put limits on the eligibility for tax credits, you were wrong.  While the documentation requirements for the tax credit largely mirror the DOL temporary regulations, there is one large difference when it comes to paid leave for childcare purposes.  IRS requires that the documentation include the age of the child – and if the need for leave is to care for child under older than 14 during daylight hours, the documentation must include a statement that special circumstances exist requiring the employee to provide care.

So, while an employee may be eligible for leave for any child under 18, the employer will only be eligible for a tax credit if the leave is for children 14 and under (absent some exceptional circumstance).   This makes clear that employers need to be careful to gather needed documentation to capture as much tax credit as possible. Given the implications, employers should include these documentation requirements in their policies to ensure both compliance with DOL regulations and also eligibility for tax credits.  If the employee fails to provide them, after giving them notice and an opportunity to correct the failure, employers should deny the leave.

While the world was still discussing Friday’s passage of the landmark stimulus CARES Act, the Department of Labor issued additional guidance regarding the Families First Coronavirus Response Act.

Remember, the Response Act requires many employers to provide emergency paid sick leave and expanded family and medical leave for specific reasons related to COVID-19.  The April 1, 2020 effective date is looming, so if you have fewer than 500 employees, be sure to get those posters up.  Why?  Who will see your bulletin boards these days?  The DOL thought of that – if your employees are teleworking, that means you should email, direct mail, post on your Company’s intranet or put those posters up on your website.

As you may have noticed, the Response Act contained some exemptions, including one for small businesses and others designed to ensure that the employers of Health Care Workers and First Responders are not short-staffed during the pandemic, as a result of the new emergency paid leave requirements.

Small Business ExemptionAn employer with fewer than 50 employees may qualify from an exemption from providing (a) paid sick leave due to school or daycare closures for COVID-19 related reasons and (b) expanded family and medical leave due to school or daycare closures for COVID-19 related reasons, when doing so would jeopardize the viability of the small business as a going concern.

What does that mean?  An officer or director will need to gather documentation that:

  1. paying the leave would result in the expenses of the small business exceeding revenues and cause the business to cease operating at a “minimal capacity;”
  2. the absence of the employee(s) requesting paid leave would entail a substantial risk to the financial health or operational capabilities, due to their specialized skills, knowledge or responsibilities; or
  3. there are not sufficient workers able, willing and qualified to perform the services provided by the employee(s) requesting the paid leave and their services are necessary for the small business to operate at a minimal capacity.

OK, so what does that mean?  A small employer (less than 50 employees) who meets one of these criteria will not need to grant the paid leave when it is requested for reasons related to the closure of a child’s school or where the child’s care provider is unavailable due to COVID-19 related reasons. Small employers will not be exempt from the obligation to pay emergency sick leave for the other qualifying reasons, related to COVID-19, which include:

  • federal, state or local quarantine or isolation order;
  • the employee has been advised by a healthcare provider to self-quarantine;
  • the employee is experiencing symptoms and is seeking a medical diagnosis
  • the employee is caring for an individual subject to a governmental quarantine or isolation order and is seeking a diagnosis;
  • the employee is caring for an individual subject to a governmental quarantine or isolation order or in self-quarantine; or
  • the employee is experiencing “any other substantially similar condition.”

Health Care Provider Exemption.  The DOL explained that employees who may be exempted from paid sick leave or expanded family and medical leave under the Response Act include those employees of any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy or any similar institution, employer or entity.  That exemption extends to any temporary employees, independent contractors or anyone employed by any entity that provides medical services, produces medical products or is otherwise involved in the making of COVID-19 related equipment, tests, drugs, vaccines, diagnostics or treatments.

Emergency Responder ExemptionEmployees may be excluded if they are necessary for the provision of transport, care, healthcare comfort and nutrition of COVID-19 patients, including military, national guard, law enforcement, correctional institution personnel, firefighters, EMS personnel, physicians, nurses, public health personnel, EMTs, paramedics, 911 operators, public works personnel and others with specialized skills.

The McNees Labor & Employment Practice Group is ready to help businesses with the exemption analysis as well as with the preparation of policies and forms, so that your Company is ready to comply with the Families First Coronavirus Response Act on April 1, 2020.

This post was contributed by Timothy Finnerty, Co-Chair of the McNees Corporate & Tax Group

As the coronavirus spread throughout the US and many businesses closed their doors, Congress passed the Families First Coronavirus Response Act (the “Act”). President Trump signed the Act on Wednesday, March 18. The legislation provides benefits to employees that are affected by the virus (both directly and indirectly).

Specifically, the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act, which are both part of the Act, provide employees of small employers (less than 500 employees) with paid leave if they are impacted by the virus. Our Labor and Employment Group has provided a detailed summary of qualifications, limitations and amounts of these benefits here.

In order to reduce the stress that payment of these benefits will cause to a small employer’s cash flow, the Act includes two tax credits, both of which are in the form of payroll tax credits. The credits are structured to fund the benefits that are required to be paid to employees under the Act for Emergency Paid Sick Leave and Paid Family Leave. However, employers will be required to make the payments to employees and then recoup such amounts through the mechanism of the two credits in the Act.  Some of the details are still being worked out as Congress works to finalize additional legislation, which could impact some of these provisions.

Tax Credit for Required Paid Sick Leave
The payroll tax credit for Required Paid Sick Leave provides employers with a tax credit against the social security tax it is required to pay to the IRS, equal to 100% of the “qualified sick leave wages” paid by the employer with respect to a calendar quarter. The amount of the qualified sick leave wages will depend upon the exact reason for the payment to the employee, but in all cases, it will not exceed $511 per day, per employee. The maximum amount of wages, therefore, would be $5,110 per employee.

The tax credit is also increased by a pro-rata portion of the employer’s qualified health plan expenses. The exact amount of this ‘portion’ is difficult to determine based on the language in the Act. However, the Act provides that further regulations will be prescribed to establish how these amounts will be determined.  Additional guidance will likely be finalized very soon.

Importantly, this credit is refundable to the employer. As such, if the amount of the tax credit exceeds the amount owed by the employer to the IRS, that amount will be treated as an overpayment and refundable to the employer. We expect that the IRS will release additional information this week on how those refunds will be processed. The normal process would be through the employer’s quarterly payroll return (Form 941), but a quicker process is likely being vetted by the IRS.

Tax Credit for Required Paid Family Leave
The other payroll tax credit tax in the Act is the Payroll Credit for Required Paid Family Leave. This tax credit also provides employers with a credit against the social security tax it is required to pay to the IRS, equal to the 100% of the “qualified family leave wages” paid by the employer to an employee.  The amount of the tax credit is capped at $200 per day and $10,000 in the aggregate, per employee, but is otherwise calculated as two-thirds of the employee’s regular pay.

Like the Tax Credit for Required Paid Sick Leave, the Tax Credit for Required Paid Family Leave is also increased by a pro-rata portion of the employer’s qualified health plan expenses. Additional guidance from the IRS is expected to provide more clarity on how that amount should be calculated.

This tax credit is likewise refundable to the employer. The details on how those refunds will work will be forthcoming. However, we are expecting that whatever the IRS puts in place will provide the employer with quick access to the much-needed cash. As Congress debates additional relief for everyone affected by the virus, we will keep you updated on issues impacting your business.