How the Family and Medical Leave Act (FMLA) Affects Your Business
New Tax Credit for Employers Paying Sick Leave Benefits to Employees
The Family and Medical Leave Act (FMLA), signed into law in 1993, was set up to balance the needs of employers and employees in times when employees must take extended medical leaves for serious medical conditions, including pregnancy, or to care for family members. The basic provision of the law is to require employers to give time off to employees and allow them to return to their jobs at the end of the leave without penalty.
The purpose of the FMLA is to provide job protection for covered employees. The federal FMLA law doesn't require employers to pay for the leave if the employee does not otherwise have paid time off (sick days, vacation, personal days).
The FMLA and COVID-19 and Other Public Health Emergencies
The Family and Medical Leave Act has been expanded under the Families First Coronavirus Response Act (the "FFCRA") to include paid family leave for employees who are unable to work (including telework) because they need to care for a child whose school or place of care is closed or child care isn't available due to COVID-19 issues. To offset the cost, employers may take a refundable tax credit.
Some other parts of the FMLA expansion that affect employers:
- Employees on FMLA may be entitled to the continuation of health insurance coverage in the same circumstances as before the pandemic.
- Employees who take leave to avoid exposure aren't covered by the FMLA.
- You may require employees to verify a medical condition, but that may be extremely difficult during a pandemic.
How the COVID-19 Family Leave Tax Credit Works
Employers are required to pay employees a "qualified family leave wage" for up to ten weeks of at least two-thirds of the employee's regular pay times the number of hours the employee regularly works, up to $200 a day and $10,000 total for the year.
The amount of the tax credit to the employer is 100% of the wages paid to each employee plus qualified health plan expenses and the employer's share of Medicare tax on the family leave wages it pays.
Family and Medical Leave Tax Credits - In General
This section describes how FMLA tax credits worked before the Coronavirus epidemic. The Coronavirus tax credits are being handled differently.
Briefly, here's how this tax credit works (not including the new Coronavirus tax credit): Your business must have a written policy to provide at least two weeks of paid family leave to qualifying full-time employees (pro-rated for part-time). The amount of the benefit must be at least 50% of the employee's normal pay, and you can't require the employee to use their regular paid time off for this time.
You can then claim the tax credit on your business tax return for the year you provided the benefit. This article on how to get a family leave tax credit for your business to find out more details.
State Family Leave Laws
You can't take the tax credit if paid leave is required by your state's law, but only a few states require paid family leave. Other states require employers to give unpaid family leave time to employees. The Department of Labor has information on individual state family and medical leave laws.
When Your Business Must Comply With the FMLA
The FMLA was set up primarily to affect larger employers. The framers of the law recognized that businesses with a small number of employees would have a difficult time giving employees long-term time off. The law sets up definitions for employers who must comply with the law and for eligible employees.
A covered employer is an employer: "who employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year."
Eligible employees are those who:
- Have worked for their covered employer at least 12 months (not necessarily consecutive), and
- Have worked at least 1,250 hours during the 12-month period immediately before the leave, and who
- Work at a location where at least 50 employees are employed at the location or within 75 miles of the location.
What Types of Leave are Covered?
FMLA provisions require employers to grant eligible employees up to 12 weeks of unpaid leave in a 12-month period (called a "leave year"), for one or more of the following:
- For the birth of a child and to bond with the newborn child within one year of birth
- For placement with the employee of a child for adoption or foster care and to bond with the child within one year of placement,
- For a serious health condition making the employee unable to perform their job, including pregnancy and prenatal medical care,
- to care for the employee's immediate family member (spouse, son, daughter, or parent) with a serious health condition, including pregnancy and prenatal medical care,
- Any qualifying exigency when an employe's family member is a military member on active duty or call to covered active duty status.
The 12 workweeks do not have to be consecutive, nor are employees required to take complete days. The employee may take intermittent leave or work on a reduced schedule, the time in any increments and periods of time allowed by the employer.
The term "serious health condition" is defined specifically in the law as being an illness, injury, impairment, or physical or mental condition involving inpatient care or continuing treatment by a health care provider.
The definition of serious health condition is complicated. See this chart on Pages 25 and 26 of The Employer's Guide to The Family and Medical Leave Act for more details.
How Does the FMLA Work with Disability Benefits?
If your company provides short-term or long-term disability benefits to employees, this coverage doesn't affect your requirements under the FMLA; the two can run concurrently. The FMLA provisions don't require that employees are paid. The disability benefits provide the payment.
What Else Should I Know about FMLA Regulations?
Medical certification may be required to be presented to the employer to validate the reason for the leave request.
The employer is required to continue health benefits (including family coverage) for an employee who is on FMLA leave.
Upon return from FMLA leave, an employee must be restored to his or her original job, or to an "equivalent" job, which means virtually identical to the original job in terms of pay, benefits, and other employment terms and conditions. In addition, an employee's use of FMLA leave cannot result in the loss of any employment benefit that the employee earned or was entitled to before using (but not necessarily during) FMLA leave.
Employee Notices Required
The employer must give employees an Eligibility Notice at times required by law:
- When they become eligible for FMLA leave (after 12 months' work, for example),
- Within five business days of the initial request for leave or when the company learns that an employee's leave might qualify for FMLA, and
- The first time the employee takes FMLA-qualifying leave during a year.
You must also give employees a Rights and Responsibilities notice within five days of when you find out about the employee's need for leave.
Employers must display a poster in plain view in each location, letting employees know about FMLA provisions, including how to file a complaint. You can't use your own poster; you must use the one created by the Department of Labor. Here's a site where you download a copy of the notice.
The U.S. Department of Labor's Wage and Hour Division regulates the FMLA. Check out the Employer's Guide to the Family and Medical Leave Act section for more information. This article by the IRS gives more information on how to claim the tax credit for giving employees paid family medical leave.
Disclaimer: The information in this article is intended to be a general overview. The FMLA is a complex law and each business and employee situation is unique. Check with an employment attorney to make sure you are doing everything correctly.
U.S. Department of Labor. "The Employer's Guide to The Family and Medical Leave Act." Accessed April 7, 2020.
Congress.Gov. "H.R. 6201 - Families First Coronavirus Response Act." Accessed April 7, 2020.
U.S. Department of Labor. "COViD-19 or Other Public Health Emergencies and the Family and Medical Leave Act Questions and Answers." Accessed April 7, 2020.
IRS. "COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs." Accessed April 7, 2020.
IRS. "Section 455 Employer Credit for Paid Family and Medical Leave FAQs." Accessed Apr. 7, 2020.
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U.S. Department of Labor. "The Employer's Guide to The Family and Medical Leave Act." Page 64. Accessed April 7, 2020.
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