Although most everyone on planet Earth was jumping for joy as 2020 came to an end, many employers had another reason to celebrate. With the passage of the Consolidated Appropriations Act, 2021 (the “CAA”) on December 27, 2020, employers with 500 or fewer employees (“Covered Employers”) are no longer required by the Families First Coronavirus Response Act (the “FFCRA”) to provide paid leave to employees for certain COVID-19 related reasons. (For more detailed information about the FFCRA, see our prior discussion here.)
As initially passed, the FFCRA was slated to expire on December 31, 2020, but with the passage of the CAA certain provisions were extended through March 31, 2021. While on its face this might not sound like a reason for employers to celebrate, the CAA eliminated Covered Employers’ obligation to provide FFCRA leave after December 31, 2020. Instead, employers now have the option to provide paid sick leave (“PSL”), expanded family and medical leave (“EFMLA”), or both, and those who voluntarily choose to do so between January 1, 2021 and March 31, 2021 may claim the associated payroll tax credit to be reimbursed for the cost of providing such leave. These tax incentives established by the FFCRA and extended through the CAA are designed to help alleviate the pandemic’s burden on employers and employees alike, particularly as the vaccine rollout continues and normalcy (hopefully) begins returning to the workplace. Importantly, an employer may not claim the tax credit for providing PSL or EFMLA exceeding the maximum duration permitted by the FFCRA, which means that tax credits are not available in 2021 to support leave for any employee who exhausted his or her entitlement to leave under the FFCRA during 2020.
While the leave provisions of the FFCRA were intended to support employees requiring time away from work to address bona fide personal needs and familial obligations related to COVID-19, some employers experienced a pattern of abuse by employees who saw an opportunity for an almost-undeniable two weeks’ paid vacation. For example, in light of state-imposed restrictions on interstate travel, many employees elected to travel to high-risk states on weekends or days off, knowing they would be subject to a mandatory 14-day quarantine upon their return, and that their employers could generally not deny them paid leave. Due to the strict requirements imposed by the FFCRA and the DOL’s interpretive guidance, Covered Employers were essentially required to provide paid leave to employees who self-certified that they had a qualifying reason. Employers were also generally prohibited from requiring employees to provide more detailed information or documentation substantiating the need for leave, which made it ripe for exploitation. This often resulted in unpredictable employee absences and staffing shortages, negatively impacting employers’ abilities to sufficiently manage and operate their businesses effectively.
In evaluating whether to continue offering paid FFCRA leave in the new year, there are a number of factors employers should consider. For example, it is important not to overlook the morale and fairness considerations with respect to employees who did not utilize or exhaust their entitlement to FFCRA leave during 2020 but may have a need for such leave in 2021. Since paid FFCRA leave was available to employees last year, offering it to those with qualifying reasons during the first quarter of 2021 is likely to provide much needed support to employees facing those same challenges now.
There are also meaningful financial incentives for employers to continue offering FFCRA leave. If an employer opts not to extend FFCRA leave into 2021, an employee who requires leave will likely choose to use paid time off available under an employee handbook or other organizational policy. The employer would then be on the hook for the employee’s normal wages for the duration of available time off. While compensation paid to employees is generally a tax-deductible business expense, the payroll tax credits available to employers offering FFCRA leave are likely to provide more beneficial tax advantages. These credits reimburse the employer dollar-for-dollar (up to certain maximum permitted amounts) for the wages paid to an employee during his or her qualifying leave. This means that not only does the employer saves on taxes, but the net effect is that the federal government effectively pays the wages due to the employee for paid sick leave because the credit against tax that otherwise would be due to the IRS is equal to the wages paid plus the employer’s share of health insurance and FICA/Medicare. Of course, even if an employer chooses not to offer paid FFCRA leave in 2021, it is important to remember that employees may still be entitled to an unpaid leave of absence pursuant to federal or state family and medical leave requirements.
While the CAA addresses many of the complaints employers had with respect to PSL and EFMLA leave, it is important to remember that the DOL is still taking enforcement action against organizations that violated the FFCRA. A Covered Employer remains liable for violations of the FFCRA for up to two years after the date of the alleged violation (three years if the violation is willful), and employees may file a complaint with the DOL within two years of the purported violation.
Failing to comply with the FFCRA, even accidentally, could result in significant liability for your organization.