New Paid Leave Laws, and a New Payroll Tax Credit

New Paid Leave Laws, and a New Payroll Tax Credit

Congress has passed a number of new laws in response to Covid-19. One of them establishes two new forms of paid leave: paid parental leave and paid sick leave. This article explains how they apply and also explains the payroll tax credit that is used to offset the impact to businesses.

For those of you who’ve been following my series on implementing SMS in a repair station environment, don’t worry; I plan to return to that series in the next issue.

Parental Leave

The Families First Coronavirus Response Act established a new category of FMLA-protected leave (we will call it “Parental Leave”). This category of leave only applies to leave for a “qualifying need related to a public health emergency” that arises starting March 18. The statute explains what this really means:

“The term ‘qualifying need related to a public health emergency’, with respect to leave, means the 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.”

With schools closing across the nation, this means that anyone with children under 18 could be eligible for this sort of leave. To be clear: Parental Leave is for parents who have to care for their children because the children are at home. If the employee gets sick from Covid-19 then the employee is covered under the more traditional elements of FMLA.

Many aviation businesses members are small businesses that haven’t had to comply with FMLA in the past because it excludes businesses with fewer than 50 employee. The new law includes those smaller businesses, so this will be new territory for many aviation companies.

Typically FMLA applies to a business that employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year. The way this is worded, an aviation business that has just gone from 60 employees to 6 employees because of the current crisis likely remains liable for FMLA through at least the end of this year (on the assumption that they had 50+ employees in 20+ weeks last year, but may not meet that threshold this year).

Parental Leave, on the other hand, applies to employers with fewer than 500 employees. So the largest companies are exempt from the new Parental Leave requirements, and it will instead only apply to small and medium-sized businesses.

For employers who have fewer than 25 employees (“Very Small Employers”), there are complicated exemption rules. If this applies to you, then you can see my blog (https://aviationsuppliers.wordpress.com) for more details about this.

Employees become eligible for Parental Leave under FMLA after only working for 30 days (so your newer employees will be eligible for Parental Leave, to care for their children, even though they are not yet eligible for other forms of FMLA protection).

This sort of Parental Leave may be paid leave. The pay, though, is offset by a payroll credit for the employer (see below). Parental Leave is unpaid for the first ten days of leave (two weeks for employees who normally work five days a week). But after those two weeks, the leave is paid leave! The pay must be at least two thirds of the employee’s regular rate of pay, and it must be paid for the number of hours the employee would normally be scheduled to work. There are also rules for calculating hours for employees with varying schedules.

There are upper limits. The maximum daily pay under this law is $200 per day and the maximum total pay is $10,000 in the aggregate. So if you are paying someone $200 per day under this law, then you would be obliged to pay up to 50 work days (a total of $10,000), or about seven weeks. You can pay more than this amount but anything more is not going to be subject to the payroll tax credit.

Paid Sick Leave

Starting no later than April 2, the new law also requires employers to provide 80 hours of paid Sick Leave to each employee. If your company already does this, then the law might not impose any new obligations on your business. If your company does not yet provide at least 80 hours of paid sick leave then you will need to make sure that you comply with the law.

There are six reasons that one is permitted to claim Paid Sick Leave under the new law (they are numbered because different categories receive different pay):

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.

(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

(4) The employee is caring for an individual covered under item (1) or (2), above.

(5) The employee is caring for his or her child, if the school or place of care of the child has been closed, or the child’s normal care provider is unavailable, due to COVID–19 precautions. This reason #5 may be subject to the paid Parental Leave protections as well.

(6) The employee is experiencing any other condition specified by the Secretary of Health and Human Services (so amendments are possible).

The new Sick Leave law becomes effective not later than April 2 (the wording of the Act is ambiguous so the Department of Labor could set an earlier effective date). It applies to any employer who is covered under the Fair Labor Standards Act, so it applies to almost everyone in aviation.

The law provides 80 hours of paid sick leave as of the effective date, so paid sick leave provided before the effective date probably does not count against the 80 hour obligation. For example, if your company normally provides 80 hours of sick leave per year, and you already paid an employee for 80 hours of sick leave that the employee used in January 2020, then that employee is likely entitled to another 80 hours of paid sick leave under the new law.

Paid Sick Leave is typically calculated based on the employee’s required compensation and the number of hours the employee would otherwise be normally scheduled to work, but this amount is also capped under the law. The maximum required dollar amount of Paid Sick Leave is limited, and the limits are based on the six categories shown above:

  • $511 per day and $5,110 in the aggregate for a use described in reasons (1), (2), or (3), above;
  • $200 per day and $2,000 in the aggregate for a use described in reasons (4), (5), or (6), above.

Many laws that protect employees require that information about the law be posted. Although parental leave is covered under the FMLA posting requirements, the new Sick Leave law requires a new poster, which can be downloaded from the Wage and Hours Division website (https://www.dol.gov/agencies/whd).

Payroll Tax Credit

If your business pays Sick Leave or Parental Leave under these provisions, then it can use the amount paid (subject to the limits described above) as a payroll credit. If you pay more than the statutory amounts then you can only take a credit for the statutory amounts. If your payroll credit exceed your payroll tax, then you can apply for an expedited refund from the IRS. If you take the payroll credit, then you will have to treat that money as (taxable) income.

Both of these new forms of paid leave expire on December 31, 2020, so they will continue to apply through the end of the year. If you find yourself needing to provide Paid Parental Leave or Sick Leave under the new law, then please be sure to look at the law or get appropriate legal advice because there are additional details in the law that may apply to your specific fact pattern!