March 24, 2021
On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”) into law. The ARPA grants relief to employers by extending and modifying several of the provisions initially enacted in prior COVID-19 relief bills, particularly the Families First Coronavirus Response Act (“FFCRA”) and the 2021 Consolidated Appropriations Act (“CAA”). The ARPA, effective April 1, 2021 is timely, given that the availability of payroll tax credits under the CAA will sunset on March 31, 2021. These optional payroll tax credits will now be extended through the ARPA until September 30, 2021.
The ARPA makes the following changes to the leave provisions of the FFCRA:
1. The ARPA Resets the 10-Day Limit for the Tax Credit
The ARPA resets the annual allotment of up to 80 hours (10-days) per employee of qualifying paid sick leave available for 2021 tax credits as of April 1. That is, any days an employee took before April 1 will not count toward the cap following that date. Of notable significance and importance, the ARPA does not obligate an employer to provide additional leave but allows employers to update their leave policies to offer additional leave to employees if they choose. Employers will need to make their own decision regarding whether to extend this additional leave.
2. The ARPA Provides Additional Qualifying Reasons to Take Leave
In addition to the reasons originally set forth in the FFCRA, employers can now receive tax credits for the following qualifying reasons:
- The employee is seeking or awaiting the results of a diagnostic test for or a medical diagnosis of COVID-19 after an exposure or at the employer’s request;
- The employee is obtaining a COVID-19 vaccine; or
- The employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccine.
3. The ARPA Expands and Increases the Tax Credit
Under the FFCRA, employers could only take tax credits to cover the cost of providing emergency family leave if the employee was unable to work to care for their child whose school or place of care had been closed or was unavailable due to the public health emergency. The ARPA expands this prior limitation by:
- Increasing the aggregate cap for tax credits from $10,000 to $12,000 per employee, because the number of weeks of available paid family leave increased from ten (10) to twelve (12) weeks;
- Expanding the reasons to take paid sick leave in addition to the original qualifying reasons to include the additional reasons set forth above; and,
- Eliminating the requirement that the first 10 days of expanded family and medical leave is unpaid.
4. The ARPA Modifies Bases to Disqualify Employers from Receiving Tax Credit
Under the ARPA, employers are disqualified from receiving FFCRA payroll tax credits if they:
Fail to comply with the FFCRA, including its anti-retaliation provisions; or Discriminate against some employees in favor of highly compensated employees, full-time employees, or employees based on employment tenure with respect to leave.
5. The ARPA Extends Unemployment Assistance Related to COVID-19
The ARPA also extends unemployment assistance to individuals who become unemployed or are unable to work due to COVID-19, including:
- Extending the Pandemic Unemployment Assistance Program to provide unemployment benefits to individuals who are ineligible for regular or extended benefits under state law (e.g., self-employed individuals, independent contractors, workers with limited work history) for a total of 79 weeks through September 6, 2021;
- Extending the Federal Pandemic Unemployment Compensation program, providing both individuals who regularly qualified for unemployment benefits and those who qualify for PUA $300 per week of unemployment until September 6, 2021;
- Extending the Emergency Unemployment Compensation program, which will provide federal funding for up to 53 weeks of additional unemployment benefits until September 6, 2021; and
- Exempting the first $10,200 of unemployment benefits from federal income taxes for household gross income of less than $150,000.
Ultimately, deciding whether to offer FFCRA like leave under the ARPA is an individual choice that should be made carefully by each employer given their specific circumstances, considering the industry, geographic region, company culture, competitive needs, workforce, financial circumstances, mandatory local supplemental paid sick leave requirements, and other similar factors.
Given the continuous and ongoing changes with COVID-19 related laws, we encourage you to contact Pearlman, Brown and Wax’s Employment Law Department for further guidance and assistance.
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