Participation Remains Voluntary! The Impact of the American Rescue Plan Act of 2021 on Employee Leave Relating to the Families First Coronavirus Response Act
The Families First Coronavirus Response Act (FFCRA) expired by its terms on December 31, 2020. However, the law gained a bit of a second life through the federal COVID-19 relief package passed in December 2020. Pursuant to that package, smaller employers (those with fewer than 500 employees) who were previously required to comply with the FFCRA were given the ability to continue to provide paid FFCRA leave to eligible employees on a voluntary basis, and could continue to receive tax credits relating thereto through the end of March 2021.
On January 14, 2021, the (then incoming) Biden Administration outlined its proposed American Rescue Plan legislation. As originally structured, the plan would have made several significant changes to the FFCRA including, among other things, making compliance mandatory for employers through the end of September 2021, and expanding the FFCRA’s reach to all employers, regardless of size. The final bill, passed by Congress on March 10, 2021, does neither of these things.
Nevertheless, the Act does impact the current voluntary FFCRA leave/tax credit system in a number of ways. Here are the highlights:
- The law keeps a voluntary compliance/federal tax credit system in place for smaller employers (those with fewer than 500 employees) through September 30, 2021.
Pursuant to the voluntary system, qualified employers who provide leave to eligible employees for one or more reasons that would have qualified for leave under the FFCRA can seek federal tax credits in an amount equal to the amount paid to the employees taking the leave, up to the compensation limits set under the original law. So, for example, an employer can obtain tax credits for an amount of compensation of up to $500 per day (plus health care premium costs) paid to an employee who takes leave because of a quarantine/isolation order, because he/she has been advised to self-quarantine by a health care provider, and/or because he/she is suffering from symptoms of COVID-19 and seeking a diagnosis. A qualified employer can obtain tax credits for an amount of compensation up to $200 per day (plus health care premium costs) paid to an employee who takes leave to care for another individual for COVID-related reasons, and/or to care for a child as a result of a school or day care closure.
The law adds some new reasons for paid leave for which a qualified employer can obtain tax credits – because “the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization ….” An employer can obtain tax credits for an amount of compensation of up to $500 per day for leave taken for this reason.
The allotment of emergency sick leave available to eligible employees, and for which employers can obtain tax credits, will reset to ten days (eighty hours for full-time employees) beginning on April 1, 2021. Consequently, regardless of how many days of emergency sick leave an employee may have previously taken (even if he or she used all ten days previously available under the FFCRA), beginning on April 1, 2021, an eligible employer can seek tax credits for up to ten additional days of leave provided to that employee for any of the emergency sick leave reasons outlined under the FFCRA. With the additional reasons identified above, these emergency sick leave reasons include: because of a quarantine/self-isolation order; because the employee has been advised to self-quarantine; because the employee is suffering from symptoms and seeking a diagnosis; because the employee is seeking the results of a diagnostic test for COVID-19and has been exposed to COVID-19 or the employee’s employer has requested such a test, and because the employee is obtaining a COVID-19 vaccine and/or suffering from circumstances relating to the vaccine.
The total amount of family sick leave available to eligible employees, and for which employers can obtain tax credits, will expand to fourteen weeks beginning on April 1, 2021. Unlike the reset of emergency sick leave highlighted above, however, the law does not reset the amount of paid family leave for which an employer can obtain tax credits. Instead, the law adds an additional two weeks of paid leave to the total amount of leave/tax credits available since the inception of the FFCRA. Consequently, if an employee who has previously used twelve weeks of paid family leave under the FFCRA seeks additional leave after March 31, 2021, the employee’s employer can obtain tax credits in connection to its provision of up to two additional weeks of leave.
- The law prohibits eligible employers from discriminating in favor of “highly compensated individuals” under IRS rules (i.e., individuals who own 5% or more of the business and/or make more than $130,000), in favor of full-time employees, or on the basis of an employee’s employment tenure with respect to the employers’ provision of paid leave that would qualify for tax credits.
Because employer participation in the tax credit system is voluntary, it certainly appears that employers have a fair amount of freedom to decide whether to impose certain restrictions on which of their employees may be eligible to take additional leave under the system. For example, it may be entirely legitimate for employers to allow employees in certain job classifications to take additional leave (and seek the corresponding tax credits), but prevent employees in other classifications from doing the same. However, the law makes clear that employers need to be careful not to discriminate based upon the three categories highlighted above. In addition, we would certainly recommend that employers be careful to avoid differences in access to paid leave that could be tied to an employee’s membership in one or more protected classes under applicable discrimination laws.
It is likely that employers will see some additional guidance relating to the implementation of these new rules (likely from the IRS) in the near future. In the meantime, please contact John Gardner or any other member of DeWitt’s Employment Relations practice group if you have any questions or need any further guidance relating to the FFCRA/tax credit system.