WHAT SMALL BUSINESSES NEED TO KNOW ABOUT CORONAVIRUS PAID SICK LEAVE, $20,000 WISCONSIN GRANTS, FAMILY MEDICAL LEAVE ACT EXPANSION AND SELF EMPLOYMENT BENEFITS
As a business attorney I’m staying on top of the impacts of COVID-19 or Coronavirus legislation on my business clients. I wrote up five legal tips Sunday. Today I have four big updates to share for Wisconsin businesses affected by the virus. The news coverage is not very good at properly interpreting the details so I thought a blog post based on the actual text of the law is better. I’m not charging anyone for writing this just trying to get correct information out there. Please share this with any small business owners or self employed people you know.
1. All Small Businesses Will Be Required to Provide Paid Sick Leave
The Families First Coronavirus Response Act – H.R. 6201 was signed late yesterday constituting what the Federal Government calls “Phase 2” of relief related to the pandemic. Here is a link to the text of the act. https://www.congress.gov/bill/116th-congress/house-bill/6201/text One important requirements for small businesses like my clients is, as far as I’m aware, the first federal mandate of paid sick leave.
The paid sick leave provisions of the act apply to all employers with less than five hundred (500) employees. According to § 5102(a) of the Act employee is entitled to paid sick leave if any of the following apply.
- The employee is subject to a Federal, State or Local quarantine or isolation order;
- The employee has been advised by a doctor to self-quarantine;
- The employee is experiencing symptoms of COVID-19 and seeking diagnosis;
- They are caring for an individual subject to a quarantine order or advised by a doctor to self quarantine;
- They are caring for their child if that child’s school or place of care has been closed.
If both the employer and employee qualify for this provision the employer is required to pay a total of 80 hours of sick leave at their regular rate of pay for a full time employee. For a part time employee, the company must average the number of hours worked over a two week period and pay that. Notably, employers are also not able to deduct this leave from other leave it provides.
This leave will be funded by a credit through the payroll taxes employers are required to pay. If the credit exceeds the payroll taxes for the Quarter the government will be issuing refunds. Final regulations on this program have not yet been issued so some things may change slightly but these are the black and white requirements. The Secretary of Labor will be entitled to exempt businesses with less than 50 employees from these requirements. We will continue to look for information about how frequently these exemptions are going to be granted.
2. Expansion of Family Medical Leave Act
Hand in hand with the paid sick leave is a drastic temporary change to the Family Medical Leave Act, known as the “FMLA”. This Act is the Federal law which has required employers of more than 50 employees to allow unpaid leave to their employees and guarantee job security going forward.
The huge change here is that FMLA now applies to businesses with under 500 employees…which is an entirely different subset of businesses. Another big change is that qualifying leave related to Coronavirus under FMLA now is paid leave. Any employee who has been employed for at least thirty (30) days is covered.
For the employee’s FMLA leave to qualify as related to coronavirus it must be due to either of the following:
- A need to care for their minor child if their school or place of care is closed; or
- The child care provider of their minor child is unavailable due to coronavirus.
If leave is due to the above reasons then it needs to be paid leave after 10 days. The rate of pay is two thirds (2/3) the normal rate multiplied by the number of hours the employee would otherwise be scheduled. In no case shall the amount exceed $200/day or $10,000 in the aggregate.
This leave dovetails the sick leave requirements. Employees are permitted to use sick leave, including the COVID-19 related leave just discussed, during the ten (10) day waiting period. This is at a different rate of pay than the family leave. Again regulations are not yet out, but those managing payroll need to understand how these programs work together.
Another impact of the FMLA expansion is that small employers are now generally required to ensure job security for those out on leave. Employers with less than twenty five (25) employees may be exempt from this new requirement but only if they meet certain conditions showing that re-hire is unfeasible. How to show those requirements requires individual assessment of the company by a good attorney or accountant.
3. Wisconsin $20,000 Grants
Governor Evers announced yesterday a program called Small Business 20/20. This program is administered by the Wisconsin Economic Development Corporation and aims to provide grants of up to Twenty Thousand Dollars ($20,000) to businesses affected by the outbreak. You can find out more about the requirements here. https://wedc.org/programs-and-resources/small-business-2020/
This program is available to any small business that has a current loan in good standing with a Community Development Financial Institution or “CDFI”. Additionally the business must have less than 20 employees and less than $2 Million in revenue. The grant can be used to pay payroll and rent.
The CDFI program is a federally administered lending program designed to help new businesses grow. https://www.cdfifund.gov/Pages/default.aspx. While these specific grants are limited to those with a current CDFI loan, in general many Wisconsin businesses could be eligible for such a loan if they knew about the CDFI program and its requirements. If you have qualifying business with a CDFI loan you can apply for the grant. If you don’t and have cash flow needs consider applying for such a loan.
4. Tax Credit for Self Employed Individuals
The Act helps self-employed people too. Individuals are eligible under § 7002 if they regularly carry out a trade or business and they would be entitled to either sick leave, family leave or both under the programs I outlined earlier.
What is going to happen is your daily self employment income is going to be calculated by dividing your yearly income by two hundred sixty (260). The maximum credit is $511 per day for sick leave qualified time and $200 per day for family leave qualified time. With next years taxes you’ll receive a credit. This credit will be refundable.
The credit requires documentation that is not released yet so make sure to keep records of your activity. Final regulations will be out by next years tax time. While this help is as immediate, it will eventually be there.
These write ups are not a substitute for individualized advice from an experienced attorney. If anyone has questions feel free to contact us by live chat, by phone, or using the contact us form. If you need help and aren’t in our area I’d recommend reaching out to a qualified local attorney. As mentioned before we will be working to release further information as we know more so please feel free to stop back as more programs become available.
Atty. Jeremy Vanderloop
Lakeside Legal, Owner