As the US has continued to brace and cope with the impact of the coronavirus pandemic, both Federal and State governments have responded to help small business and their employees. On March 17, 2020 California’s Governor signed an executive order addressing 60-day layoff requirements, and on March 18, 2020 Congress passed and signed the Families First Coronavirus Response Act to address employee leave and related tax credits for employers. This memo will review the details and benefits provided in the Act and executive order.
California’s Executive Order N-31-20
For employers in California subject to the Worker Adjustment and Retraining Notification (WARN) act and Cal-WARN, labor code requires mass layoff or termination notifications to be provided with a 60-day notice. The governor’s executive order signed on March 17th, 2020 suspended the requirements of the 60-day notice under Labor code sections 1401(a), 1402, and 1403, with the objective to relieve companies from having to provide advanced notice, if a closing or layoff is related to COVID-19. This order will stay in effect until the end of the declared State of Emergency.
California businesses that are forced to order mass layoffs, closing, or relocation as a direct result of the COVID-19 pandemic are required to provide written notice to employees and government officials.
Any notice sent on 3/18/2020 or thereafter must include the following: “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”
Since the executive order does not completely suspend Cal-WARN, employers should continue to evaluate obligations under the Federal WARN Act and Cal-WARN acts.
The Families First Coronavirus Response Act
The Act expanded upon the Family and Medical Leave Act, providing temporary coverage and eligibility related to the current COVID-19 pandemic. Business owners with less than 500 employees should review the requirements and benefits becoming available to help lessen the impact to employees and their business.
The emergency expansion of the Family and Medical Leave Act will be effective April 2nd, 2020 through December 31st, 2020 and will apply to businesses with less than 500 employees and public agencies.
Under the expansion of the Act:
Payroll Tax Credits for Employers
A refundable tax credit equal to 100% of qualified family leave wages paid by an employer will be credited against the employer’s portion of social security taxes and can be claimed quarterly. If the credit exceeds the employer’s social security tax liability, the excess credit is refundable to the employer.
The Act also included provisions for sick leave under the Emergency Paid Sick Leave Act. Employers with less than 500 employees are required to provide paid sick time to workers. This applies if the worker is sick with or has been quarantined due to COVID-19, is experiencing symptoms of the disease and seeking medical attention or is caring for a child in the event of a school closure or unavailable childcare provider.
The sick leave provisions mandate (no matter how long they’ve been employed):
Payroll Tax Credits for Employers
A refundable tax credit equal to 100% of qualified sick leave wages paid by an employer
Self-employed individuals are allowed a tax credit against their regular income taxes related to sick or family leave. The per day amount is limited to the lesser of the individual’s average daily self-employment income, or $511 per day if caring for themselves, or $200 if caring for a minor child. The days allowed are the same with 10 days of sick leave and 50 days if related to family leave.
The actions by federal, state, and local governments are likely to continue as we all work together to minimize the impact of COVID-19 on our communities. Our team will be continually monitoring any policy or tax changes that may be impactful or helpful to our clients and the business community. Please use this opportunity to leverage our team for help as we navigate these challenges together. Contact us for any questions regarding these policy changes or other tax, investment, or planning related questions.