As of January 2021, providing FFCRA paid leave is optional. Employers choosing to provide FFCRA Paid Leave to their employees on a voluntary basis can now receive a payroll tax credit to cover the wages paid through September 30, 2021 (subject to applicable caps).
Last year, in response to the COVID-19 Pandemic, Congress passed the Families First Coronavirus Response Act (FFCRA), which mandated that most employers with fewer than 500 employees provide their workers with paid sick leave or expanded family and medical leave for COVID-19 related reasons. In doing so, employers received payroll tax credits for providing the paid leave. FFCRA’s mandate ended on December 31, 2020.
Congress extended the FFCRA through the Consolidated Appropriations Act of 2021 to March 31, 2021 on a voluntary basis to those employers who provided paid leave to qualified employees. Employers voluntarily providing paid leave could continue to receive a tax credit for the wages. On March 11, 2021, President Biden signed into law another COVID-19 federal stimulus package, the American Rescue Plan Act (ARPA). The ARPA extends the FFCRA and the employer tax credits through September 30, 2021 on a voluntary basis. The ARPA also adds qualifying reasons for paid leave.
Qualifying reasons for Emergency Paid Sick Leave under FFCRA and sick bank reset
As a reminder, FFCRA provided up to 80 hours of Emergency Paid Sick Leave if an employee is:
- Subject to a quarantine or isolation order;
- Has been advised by a health care provider to self-quarantine;
- Is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- Is caring for an individual who is subject to a quarantine or isolation, or has been advised by a health care provider to self-quarantine;
- Is caring for the child of such employee if the school or place of care of the child has been closed, or the child care provider of such child is unavailable due to COVID-19;
- Is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.
For qualifying reasons Nos. 1, 2, 3, employers are required to pay employee’s regular rate or applicable federal minimum wage (if higher) subject to a cap of $511 per day or $5,110 in the aggregate. For qualifying reasons Nos. 4, 5, 6, paid sick leave is paid at 2/3 of the employee’s rate, up to $200 per day or $2,000 in the aggregate.
ARPA’s additional bases for employee eligibility for Emergency Paid Sick Leave. The ARPA added additional qualifying reasons for Emergency Paid Leave to those employees who are:
- Obtaining a COVID-19 vaccine;
- Recovering from any injury, disability, illness, or condition related to such vaccine;
- Seeking or awaiting the results of a COVID-19 test when the employee has been exposed to COVID-19 or the employer requested the test.
Employees using these new qualifying reasons are to be paid at their full regular rate of pay, subject to the $511 per day or $5,110 aggregate cap.
ARPA’s reset of Emergency Paid Sick Leave. Employees’ new allotment of 80 Emergency Paid Sick Leave hours resets on April 1, 2021. Thus, if an employer opts to provide FFCRA coverage, even employees who previously exhausted the Emergency Paid Sick Leave become eligible again with a new 80 hour bank after April 1, 2021. Unused leave from before March 31, 2021 does not roll over into the new period.
Emergency Family Medical Leave and expansion
Under the previous FFCRA, employers could receive tax credits for Emergency Family Medical Leave if the employee was unable to work due to caring for the employee’s child because of closure of the child’s school or place of care or if childcare was unavailable due to COVID-19. Employees could take this leave, running concurrently with regular FMLA entitlements.
The first two weeks of Emergency FMLA were unpaid, with the remaining (up to) ten weeks paid at 2/3 the employee’s regular rate, up to $200 per day and a total maximum of $10,000. ARPA has deleted that unpaid two-week provision, and the employee is entitled to up to twelve paid weeks of Emergency FMLA in addition to the 80 hours of Emergency Paid Sick Leave if the employee qualifies.
The ARPA now increases the amount of wages for which an employer may claim the tax credit for paid expanded FMLA leave from $10,000 to $12,000 annually per employee.
Significantly, ARPA expands the qualifying reasons for expanded FMLA to include all of the reasons that would support Emergency Paid Sick Leave — not just limited to childcare reasons.
The payroll credit covers 100 percent of qualifying wages for FFCRA leave provided between April 1, 2021 and September 30, 2021. The credit also includes the amount of allocable qualified health expenses and the amount of the employer’s share of Medicare tax imposed on the qualified sick leave wages. Employers will still need to comply with the modified law and obtain the required documentation in order to claim the tax credit.
Non-discrimination and application
The ARPA includes a non-discrimination requirement. ARPA expressly states that employers may not claim a tax credit for Emergency Paid Sick Leave or Emergency Paid Family Medical Leave if they provide leave in favor of highly compensated employees, full-time employees, or employees on the basis of employment tenure with such employer. Such policies disqualify the employer from obtaining the tax credit.
Moreover, employers are not entitled to tax credits under the FFCRA if an employer fails to meet any of the requirements of the law including its application and documentation requirements.
To ensure full tax credit eligibility, employers are encouraged to either apply the FFCRA on a voluntary basis to all eligible employees company-wide, or choose not to implement FFCRA at all. In other words, employers should refrain from providing leave to some eligible employees but not others to ensure tax credit eligibility. Before April 1, 2021, employers should decide whether they will voluntarily implement the expanded FFCRA paid leave and those who choose not to do so should remove the policy from their Handbook or other policy document. Those opting to provide FFCRA benefits should expressly inform employees of the requirements and that the entitlements expire on September 30, 2021. Contact the authors or your Reed Smith employment lawyer for more information.