In the wake of the COVID-19 outbreak, federal and state governments have provided the country with several waves of relief for employers, including nonprofits, to help ease the burdens caused by the pandemic. New programs will affect nonprofit employers by imposing upon them new obligations towards their employees and by providing them with benefits to offset those obligations.
This blog post provides an overview of these obligations and benefits for employers. Other legislation will provide a variety of non-employment related benefits to nonprofits. These will be addressed in a future blog post.
New Obligations for Nonprofit Employers
The Families First Coronavirus Response Act requires employers to provide paid leave to employees who need to take time off work as a result of the pandemic. Employers who are required to follow this new act include tax-exempt organizations with fewer than 500 employees. Employers are required to provide the following in addition to any other sick leave they offer:
- Paid Sick Leave:
- Employers must provide two weeks of paid sick leave at up to 100% of an employee’s regular rate of pay if the employee is unable to work because they are quarantined or experiencing COVID-19 symptoms and seeking a medical diagnosis. The amount of paid leave is capped at $511 per day, or $5,110 in the aggregate, for a total of 10 days.
- Employers must provide two weeks of paid sick leave at up to 2/3 of an employee’s regular rate of pay if the employee is unable to work because they need to care for someone in quarantine or for a child whose school is closed. The amount of paid leave is capped at $200 per day, or $2,000 in the aggregate, for up to 10 days.
- Paid Family Medical Leave
- In general, employers must provide an additional 10 weeks of expanded paid family medical leave at up to 2/3 of an employee’s regular rate of pay if the employee is unable to work because their child’s school is closed. The amount of paid leave is capped at $200 per day, or $10,000 in the aggregate for up to 10 weeks.
- Small Business Exemption
- A small business employer, defined as one with less than 50 employees, may be exempt from the leave requirements relating to school closings where the requirements would jeopardize the ability for the business to continue.
New Benefits Available to Nonprofit Employers
Payroll Tax Credits
The Families First Coronavirus Response Act also creates two new payroll tax credits that are available to nonprofit employers. The following credits are currently available to employers that are required to provide paid leave to their employees:
- Paid Sick Leave Credit
- Employers can receive a credit from the IRS for employees who have taken paid sick leave due to being quarantined or having COVID-19 symptoms and seeking a medical diagnosis. The amount of the credit is equal to the amount of paid sick leave the employer was required to pay.
- Employers can also receive a credit for employees who have taken paid sick leave to care for someone who has been quarantined or a child whose school has been closed. The amount of the credit is equal to the amount of paid sick leave the employer was required to pay.
- Child Care Leave Credit
- Employers can receive an additional credit for employees who can’t work because of a child’s school closure. The amount of the credit is equal to the amount of paid family medical leave the employer was required to pay.
- Additional Tax Credit for Health Insurance
- Additional tax credits may be available to employers to cover the costs incurred to maintain health insurance coverage for employees during their leave period.
- To receive the credits, employers can simply retain in payroll taxes any amount spent on the types of paid leave described above. Employers need only remit to the IRS the amount of payroll taxes they owe that exceeds any credit they are entitled to.
- For example, if an employer incurred $5,000 in paid leave for their employees and they owe $8,000 in payroll taxes, they only need to remit $3,000 to the IRS.
Unemployment Insurance Benefits
The State of California Employment Development Department (EDD) has also provided a benefit to employers who have been affected by this crisis in response to guidance issued by the United States Department of Labor. The guidance encourages states to amend their laws by expanding unemployment insurance benefits to assist individuals affected by the COVID-19 outbreak.
The EDD Work Sharing Program encourages employers to avoid layoffs by offsetting reduced worker hours with Unemployment Insurance (UI) benefits. UI benefits are available when employers need to reduce their employee’s hours or temporarily suspend an employee’s work as a result of the COVID-19 outbreak. Additionally, employers can request up to a 60-day extension with the EDD to file their payroll reports and deposit state payroll taxes without penalties or interest.
Additional Benefits Under the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, due to be voted on by the House of Representatives tomorrow, may provide nonprofit employers with additional time to deposit employment taxes and may provide states with funds to reimburse employers for expenses incurred to pay unemployment benefits.
The Law Firm for Non-Profits is here to help nonprofits navigate this crisis in any way we can. Don’t hesitate to call us if we can help.
This article will be updated as additional legislation is enacted and as more guidance is provided on the application of the programs discussed.