The American Rescue Plan Act of 2021 (“ARPA”) which became law on March 11, 2021, extends and expands an employer’s opportunities to receive payroll tax credits for employee paid leave under the Families First Coronavirus Response Act (“FFCRA”).
I. Background
Under the FFCRA, employers of fewer than 500 employees (“qualified employers”) were required to provide up to 2 weeks of paid leave under the Emergency Paid Sick Leave Act (“EPSL”) and up to 10 weeks of paid family leave under the Emergency Family and Medical Leave Act (“EFMLA”) to employees who were unable to work for certain COVID-19 related reasons. The FFCRA provided employers with a corresponding payroll tax credit which offset the employer’s costs for providing the paid leave.
When the FFCRA expired on December 31, 2020, employers were no longer required to provide EPSL or EFMLA paid leave. However, the Consolidated Appropriations Act of 2021 (the “CAA”) extended the payroll tax credits for employers that voluntarily chose to provide paid FFCRA-like leave through March 31, 2021.
II. ARPA Extends and Expands the FFCRA
Similar to the CAA, ARPA incentivizes qualifying employers to continue (or start) offering the type of paid leave that was previously mandatory under the FFCRA by extending the payroll tax credits for such leave for an additional 6 months, from March 31 through September 30, 2021. As such, qualifying employers are not required to but may voluntarily choose to grant paid leave to employees for FFCRA qualifying reasons and, in return, receive payroll tax credits for such leave through September 30, 2021.
A. EPSL
Under ARPA, qualifying employers may provide an employee with 2 weeks of EPSL for use during the period of April 1 through September 31, 2021, even if the employee has already used all or some portion of the employee’s original EPSL leave. Likewise, employees who have not used all of the original 2 weeks of EPSL by April 1, 2021, are not allowed to “carry over” that prior leave beyond March 31, 2021. Simply put, ARPA resets each employee’s balance of EPSL to 2 weeks as of April 1, 2021.
Notably, ARPA expands the EPSL qualifying reasons beginning April 1, 2021, to include three very popular reasons for employee absences which were not previously covered by the FFCRA: (1) obtaining a COVID-19 immunization; (2) recovering from an injury, disability, illness or condition related to the immunization (i.e. side effects of the vaccine) or (3) seeking or awaiting the result of a COVID-19 test or diagnosis when the employee has either been exposed to COVID-19 or the employer has requested the test or diagnosis. Previously under the FFCRA, qualifying reasons for providing EPSL were limited to the employee’s inability to work because the employee: (1) is subject to a federal, state or local quarantine or isolation related to COVID-19; (2) has been advised by a healthcare provider to self-quarantine; (3) is experiencing COVID-19 symptoms and seeking a diagnosis; (4) is caring for an individual who is subject to quarantine or is self-quarantining; (5) is caring for a child whose school or place of care is closed (or child care provider is unavailable) because of COVID-19 or (6) is experiencing any other substantially similar condition specified by the US Secretary of Health and Human Services.
Employers providing voluntary EPSL may receive a payroll tax credit, subject to a cap of $511 per day, at the employee’s regular rate of pay if the employee is on leave because of the newly added qualifying reasons, because the employee is subject to a governmental quarantine or medical provider directed quarantine, or because the employee has COVID-19 symptoms and seeking a diagnosis. If an employee is taking leave for any of the remaining EPSL qualifying reasons, the payroll tax credit remains limited to two-thirds the employee’s regular rate of pay and capped at $200 a day.
B. EFMLA
Previously, EFMLA leave could only be taken by employees caring for children whose schools or place of care was closed, or whose care provider was unavailable for reasons related to COVID-19. However, beginning April 1, 2021, ARPA expands the qualifying reasons for EFMLA leave to include the original EFMLA qualifying reasons and for any of the EPSL qualifying reasons. In addition, ARPA also removes the requirement that the first 2 weeks of EFMLA leave be unpaid. As a result, employers may now voluntarily provide up to 12 weeks of paid EFMLA leave and receive the related payroll tax credit. ARPA also increases the cap on the aggregate paid leave from $10,000 to $12,000, so that employers can now take an additional $2,000 in payroll tax credits per employee for qualifying EFMLA leave.
III. Next Steps
Employers are not required by ARPA to provide paid leave; however, employers should evaluate and comply with any applicable state or local law that may require paid leave.
Further, qualifying employers who decide to voluntarily continue (or start) providing FFCRA leave to employees should ensure that leave is offered to all employees. ARPA dictates that FFCRA leave, if offered, must be offered to all employees and it must not be restricted to highly compensated employees, full-time employees or tenured employees. Employers should also update their FFCRA leave forms and policies to ensure continued compliance and satisfaction of the documentation requirements. Finally, based upon the Department of Labor’s response to prior revisions of the FFCRA, it is highly like that guidance will be issued prior to the April 1, 2021 effective date. Employers should continue to look for published guidance and/or updated FAQs from the DOL and consult with experienced employment law counsel for assistance in interpreting the effect of ARPA on their paid leave practices.
