COVID-19 Rescue Plan Act Expands Paid Leave Availability but Does Not Revive Employer Mandates

On March 12, 2021, President Biden signed into law the $1.9 trillion COVID-19 relief bill known as American Rescue Plan Act (the “ARP Act”). With respect to paid leave, the ARP Act builds upon and expands the tax credits first created by the Families First Coronavirus Response Act (“FFCRA”). (More information on the FFCRA’s tax credits can be found here.) The ARP Act’s impact on employers is likely to be limited, however, because it does not revive the FFCRA’s requirements that compelled millions of smaller employers to provide paid leave due to specified coronavirus-related reasons. This alert provides an overview of the paid leave options available to eligible employers.

Tax Credits Remain Available to Covered Employers Who Voluntarily Provide Paid Leave

The ARP Act does not reinstate the mandate that employers provide paid family or sick leave to qualifying employees as previously required by the FFCRA’s Emergency Paid Sick Leave (EPSL) and Expanded Family and Medical Leave Act (EFMLA) provisions. As we reported in our prior alerts, that mandate expired on December 31, 2020. However, tax credits for employers that choose to continue providing EPSL or EFMLA now remain available through September 30, 2021. Employers have discretion to offer either or both of the 10-day EPSL benefit and the full 12-week EFMLA benefit, or no paid leave at all. If an employer chooses to offer benefits, it must do so broadly, and cannot discriminate in favor of highly-compensated or full-time employees, nor can it condition eligibility upon an employee’s tenure with the company.

Reasons for Leave Are Clarified and Expanded to Cover Vaccine-Related Absences

Under the FFCRA, employees were entitled to take up to 10 days of paid sick leave for six enumerated coronavirus-related reasons, including time off when quarantine was required by a health care provider or government order, when needed to seek a COVID-19 diagnosis, and when necessary to care for someone who is quarantining or a child whose school or care provider was unavailable due to COVID-19. (More information on FFCRA-qualifying reasons can be found here.) Up to 12 weeks of EFMLA were available as well, but for just one of those reasons: to care for a child whose school or care provider was closed. The ARP Act expands the opportunity for paid leave under the EFMLA to include all six EPSL reasons.

Going a step further, the ARP Act extends eligibility under both EPSL and EFMLA to cover situations where the employee is:

  1. 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
  2. the employee’s employer has requested such a test or diagnosis; or
  3. the employee is obtaining immunization related to COVID-19; or
  4. the employee is recovering from any injury, disability, illness, or condition related to such immunization.

Daily Pay Rates Remain Unchanged, but the Aggregate Tax Credit Is Increased

The FFCRA’s EPSL provisions provided tax credits of 100% of an employee’s wages (up to $511 per day) for an employee taking time to quarantine or seek a diagnosis, and 2/3 of an employee’s wages (up to $200 per day) to care for another or for childcare reasons. The ARP Act continues these rates, and classifies the newly-expanded reasons for leave at the 100% / $511 level for 10 days. All EFMLA remains payable at 2/3 pay (up to $200 per day), but the aggregate cap is increased from $10,000 to $12,000.

Interaction Between EPSL and EFMLA in First Two Weeks of Leave Remains Murky

Under the ARP Act, paid EFMLA is now available for immediate use, even if an employee has EPSL available for the same reason and for the same time period. (Previously, the paid portion of the EFMLA did not commence until after the first 10 days of leave had passed.) The Act makes clear that employers cannot take two tax credits for the same wages. This seems to prevent a situation where an employee would take both EFMLA and EPSL for the same days. But the Act is unclear about exactly how the two entitlements are intended to interact. As with the FFCRA in 2020, we expect the U.S. Department of Labor to provide guidance on this front.

Employees’ Emergency Paid Sick Leave Bank Will Reset on April 1, 2021

Under the original FMLA, eligible employees are entitled to 12 weeks of leave over a 12-month period. The EFMLA adopted this construction, but with a sunset of December 31, 2020, no employee would have ever been entitled to more than 12 weeks of coronavirus-related EFMLA. With the ARP Act’s expansion, employees who took EFMLA in 2020 will have additional time available in 2021 based on standard FMLA principles, if their employers elect to offer the benefit.

Emergency Paid Sick Leave, on the other hand, was a one-time entitlement under the FFCRA that has expired and would not automatically renew after 12 months. In light of that fact, the ARP Act effectively reset employees’ EPSL grant of 10 days or 80 hours, effective April 1, 2021. Thus, employees who previously took EPSL will again be eligible if their employers choose to make this benefit available.

Should Employers Offer the Expanded Leave?

With vaccine availability increasing, it is likely that many employers will be allowing employees to take work time to get vaccinated. And many of those who have been vaccinated to date have reported experiencing short-term side effects, particularly after receiving their second shot. Under the ARP Act, an employer who anticipates such absences can elect to have the federal government subsidize the paid time off through the expansion of EPSL and/or EFMLA. And with cases on the decline and schools reopening, there may be less of a risk that employees will take lengthy leaves in 2021. And yet, expanding these paid leave benefits on the heels of a year of remote work and disruption may not be right for many employers. Ultimately, each eligible employer will need to weigh the pros and cons of the voluntary expansion and make the decision that best fits its workforce.

For more information regarding the FFCRA, the ARP Act, or COVID-19’s impact on your business, or to discuss whether it makes sense for your business to offer additional EPSL or EFMLA, please contact one of our employment or tax attorneys.