Updated on April 22, 2021
Employees may be eligible for additional paid leave for COVID-19 reasons, but only if their employer voluntarily agrees to extend such leave granted under the American Rescue Plan Act of 2021 (Act), signed into law by President Biden on March 11. This Act further extends the paid leave that first became available under the Families First Coronavirus Response Act (FFCRA) of 2020. This leave was extended through March 31 and made voluntary by the COVID-related Tax Relief Act of 2020 (Tax Relief Act), enacted in December 2020. The American Rescue Plan further extends the ability of employers to offer this leave and codifies the related tax credits for employers that offer paid sick and family leave to their employees.
The FFCRA required all private employers with fewer than 500 employees and all public employers to provide 10 days of paid sick leave and up to 10 weeks of paid family leave to employees under certain pandemic-related circumstances. Mandatory emergency paid sick leave (EPSL) and emergency family and medical leave (EFMLA) expired on December 31, 2020. The Tax Relief Act extended eligibility for EPSL and EFMLA leave through March 31, 2021, with an accompanying tax credit for private employers who voluntarily agreed to do so. The American Rescue Plan (1) extends the availability of the credits to wages paid from April 1, 2021 through September 30, 2021 and (2) resets the cap for these wages.
Accordingly, private employers with fewer than 500 employees can receive a 100 percent tax credit for up to 10 days of paid sick leave, capped at $511 per day if the leave is used for one of the expanded eligibility reasons for sick leave discussed below or for absences related to COVID-19 for the employee. The leave is capped at $200 per day if the paid sick leave is for the remaining permissible reasons under FFCRA, including absences to care for another individual for COVID-19 related reasons. In addition, these employers can also receive a 100 percent tax credit for up to 12 weeks of emergency paid family leave, capped at $200 per day and $12,000 in the aggregate.
The American Rescue Plan also made other important changes to the landscape of COVID-related leave:
Employers who choose to provide, or continue to provide, paid sick leave essentially hit a “reset button” on March 31, 2021. Beginning April 1, 2021, employees who meet the COVID-related eligibility reasons would be able to take an additional 10 days of sick leave. Eligible employees would also be allowed to use any remaining available EFML if their employer voluntarily agrees to provide FFCRA leave. While some language in the American Rescue Plan Act could be read to grant an additional 12 weeks of EFML beginning April 1, previous guidance by the Department of Labor stated that eligibility for EFML depended upon how much FMLA leave an employee had already taken during the 12-month measuring period that an employer adopted for FMLA leave. The Department of Labor has not yet issued guidance on the American Rescue Plan, but such guidance would obviously be helpful for employers who choose to grant leave on April 1.
Lane Powell’s team of employment attorneys is here to help you develop and implement the strategies that supports your business and your employees. For more information, consult Lane Powell’s COVID-19 Resource Center or contact Katheryn Bradley or Hannah Ard. For tax questions relating to the American Rescue Plan, contact Eric Kodesch.
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