Latest COVID-19 Relief Package Provides Tax Credits for Voluntary Paid Sick and Family Leave

On March 11, 2021, President Biden signed H.R. 1319, the American Rescue Plan Act of 2021, which extends tax credits for private employers with 499 or fewer U.S. employees that voluntarily decide to provide emergency paid sick and/or family leave according to the otherwise-expired standards in the Families First Coronavirus Response Act’s (FFCRA) Emergency Paid Sick Leave Act (EPSLA) and Emergency Family Medical Leave Expansion Act (EFMLEA).

Time Period Covered: Tax credits apply to qualifying leave taken from April 1, 2021 through September 30, 2021.

Reasons Employees Can Use Paid Sick or Family Leave: Originally, there were six different reasons employees could take emergency paid sick leave (EPSL), but employees could only also take EFMLEA leave for one of those six reasons (#5 below):

  1. Employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
  2. Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  3. Employee is seeking a medical diagnosis if experiencing coronavirus symptoms.
  4. Employee is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  5. Employee is caring for a child if school or place of care closed, or childcare provider is unavailable, due to coronavirus precautions.
  6. Employee is experiencing other conditions similar to COVID-19, as identified by the secretary of health and human services (to date no such similar condition has been identified).

Beginning April 1, 2021, all six EPSL reasons remain covered uses.  Moreover, each covered use also qualifies as a reason to take EFMLEA as of April 1, 2021. Additionally, reason #3 is expanded to include situations where:

  • Employee is seeking or awaiting results of a diagnostic test for, or a medical diagnosis of, COVID-19 and was either exposed to COVID-19 or the employer requested such test or diagnosis; or
  • Employee is obtaining COVID-19 immunization or recovering from any injury, disability, illness, or condition related to such immunization.

Eliminating Initial Unpaid Period of Emergency Family Leave: Originally, whether an employee’s first need for qualifying EFMLEA arose in 2020 or during the first three months of 2021, the first two workweeks of such leave were unpaid, with the remaining 10 weeks paid. Beginning April 1, 2021, the entire 12-week period of EFMLEA is paid, and the overall amount of pay employees can receive increases from $10,000 to $12,000 (because of the two additional weeks of paid leave); however, the actual pay rate (two-thirds an employee’s regular rate) and daily pay cap ($200) for EFMLEA remain unchanged.  The pay rate (either two-thirds or 100%) and daily pay cap ($511) for EPSL also remain the same.

Another 80 Hours of Emergency Sick Leave: Employers that voluntarily allow employees to take EPSL must provide access to up to 80 hours of leave to use from April 1, 2021 through September 30, 2021, and a proportionate amount for non-full-time employees. This is in addition to the up to 80 hours employers had to let employees use in 2020 or could voluntarily allow them to use from January through March 2021 (i.e., April 1, 2020 through March 31, 2021). Note, however, that EPSL employees did not use from April 1, 2020 through March 31, 2021 does not carry forward into (and cannot be used during) the April 1, 2021 through September 30, 2021 period.

Cannot Pick & Choose Who Gets Leave: For these new April-through-September 2021 tax credits, employers cannot discriminate concerning employees to whom they will voluntarily offer qualifying leave. For example, employers will not receive tax credits if they discriminate in favor of highly compensated or full-time employees, or on the basis of tenure.

Other Rules Remain the Same:  The new tax credit provisions that allow employers to voluntarily extend this paid leave to employees provide that in order for the wages paid to qualify for the tax credits, employers should act “as if” the FFCRA rules still applied.  Thus, prior rules and threshold questions, including which employers are covered, employee eligibility rules, information and documentation rules, etc., appear to remain unchanged. Additionally, this means that, unless a potential exemption applies, employers deciding to voluntarily provide EPSL and/or EFMLEA must allow employees to use leave for all covered purposes and in an amount the EPSLA and/or EFMLEA would require.

Although these new tax credits become available in approximately two weeks, employers do not have only two weeks to “get into compliance,” because the tax credits are for qualifying leave employers voluntarily provide; there is no hard start date to provide benefits (only an end date for the tax credits) and no mandate to provide the leave in the first place. Nevertheless, whether for employee relations purposes only, or because they are currently, or could be in the future, subject to a state or local emergency paid sick leave law, employers should consider reaching a conclusion sooner rather than later concerning whether and how they intend to participate in this voluntary leave program, which provides tax credits by the federal government to employers. Employers weighing the pros and cons of participation should consider discussing the matter with knowledgeable employment, as well as tax, counsel.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.