With the enactment of the American Rescue Plan Act of 2021 (ARPA), employers with fewer than 500 employees may continue to collect tax credits for voluntarily providing expanded leave originally provided under the Families First Coronavirus Response Act (FFCRA). As we discussed in our previous alert, the FFCRA’s mandatory leave provisions, requiring covered employers to provide Emergency Paid Sick Leave (EPSL) and Expanded Family and Medical Leave (EFML), expired on December 31, 2020. Congress later provided employers with an opportunity to continue to provide the FFCRA leave – on a voluntary basis – in exchange for tax credits, up through March 31, 2021. Now, the ARPA extends availability of the tax credits to those employers who qualify and voluntarily provide employees with EPSL and/or EFML through September 30, 2021. If you are an employer providing this leave voluntarily you must ensure that you are complying with the new rules under the ARPA to ensure eligibility for the tax credits. Some of the key changes to the FFCRA-type leave provisions include:
Restart EPSL hours: The ARPA restarted the bank of hours available for EPSL. Starting April 1 and through September 30, 2021, employers may voluntarily provide a new bank of up to 80 hours of EPSL for which the tax credit will apply. This means employees who previously exhausted EPSL are now entitled to an additional 80 hours of paid time off.
Expanded reasons for EPSL leave: The ARPA expands the existing list of qualifying reasons for EPSL to also include getting a COVID-19 vaccine, recovering from adverse reactions to the vaccine, and awaiting the results of a COVID diagnosis or test after having close contact with a person with COVID-19 or at the employer’s request. All of the new EPSL reasons for leave are subject to a higher cap of 100% of salary ($511 per day).
Expanded reasons and paid time under EFML: Previously, EFML was only available when needed due to closure of a child’s school or daycare. Starting April 1, the ARPA expands EFML to include all of the same qualifying reasons as EPSL. Also, the ARPA eliminates the requirement that the first 10 days of EFML be unpaid and thus, provides for a total of 12 weeks of paid EFML. The EFML rate of pay continues to be two-thirds of the employee’s regular rate, up to $200 per day (regardless of the reason for the leave) but because the number of weeks of paid leave increased, the FFCRA maximum tax credit of $10,000 per employee increased to $12,000.
Non-discrimination mandate: Employers who choose to provide the qualifying paid leave under the FFCRA and want to qualify for the tax credit are prohibited from discriminating in favor of highly compensated employees, full-time employees, or on the basis of employment tenure.
The Department of Labor (DOL) should issue guidance in regards to the ARPA, but at this point guidance has not been issued.