On March 10, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA” or “the Act”). Included in the Act are three major takeaways for employers that impact both small and large workplaces:
1. Tax credits for voluntarily extending and expanding paid leave under the FFCRA;
2. Employer-paid COBRA subsidies for six months; and
3. Additional unemployment insurance benefits.
Employers must understand and act upon these new rules and regulations and update their policies and practices accordingly. For employers that do business in California, Governor Newsom also signed Senate Bill (SB) 95 into law on March 19, 2021, creating Labor Code section 248.2, which extends and expands requirements for employers to provide supplemental paid sick leave to employees affected by Covid-19.
This article provides a quick reference for employers’ new obligations.
1. FFCRA Tax Credits and Expanded Leave
Until December 31, 2020, under the Families First Coronavirus Response Act (“FFCRA”), employers with fewer than 500 employees were obligated to provide employees with paid leave when employees could not work for six qualifying reasons related to Covid-19. The FFCRA provided employers a refundable tax credit to offset the cost of providing such paid leave.
The obligation to provide emergency paid sick leave and expanded family medical leave under the FFCRA expired on December 31, 2020; however, employers were given the option to continue doing so in exchange for tax credits through March 31, 2021. That date has now been extended to September 30, 2021 under the ARPA, which also expanded the qualifying reasons for taking paid leave under three new categories, and eliminated the two-week (unpaid) waiting period for taking paid emergency family leave.
Below is a helpful Q&A regarding the essential aspects of the ARPA:
1. What are the qualifying reasons for FFCRA paid sick leave under the ARPA? If employers elect to do so, employers now may provide paid leave and claim tax credits when an employee cites any of the original six reasons under FFCRA, as well as the following three new reasons added under the Act:
1) Obtaining a Covid-19 vaccine;
2) Recovering from an injury, disability, illness or condition related to obtaining a Covid-19 vaccine; or
3) Seeking or awaiting the result of a Covid-19 test or diagnosis when the employee has either been exposed to Covid-19 or the employer has requested the test or diagnosis.
2. When and how can an employer receive tax credits under ARPA? Beginning April 1, 2021 an employer can receive tax credit for providing up to 80 hours (10 days) per employee of qualifying paid sick leave or 12 weeks (60 days) of paid family leave, even if the employer previously obtained tax credit for providing paid leave to an employee for a covered reason.
3. How much can an employer obtain in tax credits for paid sick leave? An employer that elects to provide voluntary paid sick leave may receive a tax credit based on an employee’s regular rate of pay, up to $511 per day, for up to 10 days of paid leave.
4. How much can an employer obtain in tax credits for paid family leave? An employer who elects to provide voluntary paid family leave may receive a tax credit of 2/3 the employee’s regular rate of pay, up to $200 a day, subject to an increased cap on the aggregate paid leave from $10,000 to $12,000. This increase on the cap means employers can now take an additional $2,000 in tax credits per employee for providing qualifying paid family leave.
5. Any Disqualifications? Employers who chose to voluntarily provide leave and receive tax credits must follow the non-discrimination rule, which prohibits discrimination in favor of highly compensated employees, full-time employees, or employees based on tenure regarding leave.
6. How long are tax credits available under ARPA? If an employer voluntarily elects to provide FFCRA paid sick or paid family leave to employees, they will receive a tax credit for all such payments through September 30, 2021.
2. Employer-Paid COBRA Subsidies
ARPA provides for a 100% COBRA subsidy for up to six months for former employees who involuntarily lost their job or were reduced to part-time work since November 1, 2019. Individuals who voluntarily left their job or adjusted their own hours to part-time are not eligible for the subsidized coverage. Employers are responsible for paying for the COBRA subsidy, and may claim a tax credit against Medicare payroll taxes to offset the cost of providing the subsidy.
The six-month subsidy period spans from April 1, 2021, to September 30, 2021. This subsidy applies retroactively, creating an exception to the general rule that a worker who declines COBRA coverage after losing a job or adjusting their hours to part time work cannot later change their mind. In other words, ARPA provides a “second chance” election for those individuals who failed to elect COBRA coverage and allowed their insurance coverage to lapse. ARPA does not, however, extend or modify the period of COBRA eligibility of 18 months.
Employers and group health plans must determine which former employees qualify for the COBRA subsidy under the Act and to provide new notices of COBRA continuation coverage within 60 days. The Department of Labor and other government agencies will issue model notices to streamline this process for employers by May 10, 2021.
3. Additional Unemployment Insurance Benefits
The Act extends unemployment benefits to individuals who become unemployed or cannot work due to Covid-19, including:
1. Extending the Pandemic Emergency Unemployment Compensation (“PEUC”) program up to 53 weeks through September 6, 2021;
2. Extending the Pandemic Unemployment Assistance (“PUA”) up to 79 weeks of unemployment benefits (and up to 86 weeks for individuals in states with high levels of unemployment) through September 6, 2021;
3. Extending the Federal Pandemic Unemployment Compensation (“FPUC”) $300 in supplemental benefits through September 6, 2021;
4. Extending the Mixed Earner Unemployment Compensation (“MEUC”) program through September 6, 2021; and
5. For households with gross income of less than $150,000, the Act Exempts the first $10,200 of unemployment benefits from federal income taxes.
Employers are encouraged to provide information about filing a claim with the state unemployment agency to all former employees who become unemployed or cannot work due to Covid-19.
California's Covid-19 Supplemental Paid Sick Leave ("SPSL")
Labor Code Section 248.2 requires employers to provide employees with supplemental paid time off for Covid-19 related sick leave through September 30, 2021 and is retroactive to sick leave taken beginning January 1, 2021. Labor Code section 248.2 ensures up to 80 hours of SPSL for eligible employees.
A Q&A to help California employers understand the new SPSL obligations is as follows:
1. What employers are covered? All employers with over 25 employees, including those with collective bargaining agreements.
2. Which employees are covered? Those who cannot work (or telework) due to the following Covid-19 related reasons:
a. Caring for oneself in quarantine or isolation period due to Covid-19, or are experiencing symptoms of Covid-19 and seeking a medical diagnosis;
b. Caring for a family member in quarantine or isolation period due to Covid-19, or caring for a child whose school or place of care is closed or unavailable due to Covid-19 on the premises; and
c. Attending a vaccine appointment or cannot work (telework) due to vaccine-related symptoms.
3. What time period does Labor Code Section 248.2 cover? SPSL must be provide for all qualifying reasons from January 1, 2021 through September 30, 2021.
4. Do employers have to pay SPSL right away? California employers need not provide SPSL until March 29, 2021; however, SPSL is retroactively available from January 1, 2021 forward. Employees who took qualifying leave between January 1, 2021 and March 28, 2021, may request payment for such leave if payment was not already provided. Once an employee makes an oral or written qualifying request for SPSL, an employer must immediately provide the SPSL. Employers have until the payday of the next full pay period to pay any "retroactive" SPSL. Also, employers must provide an accurate listing on the itemized wage statement of how many 2021 SPSL hours remain available to a covered employee.
5. How does a covered employee request "retroactive" SPSL? If a covered employee took leave between January 1, 2021 and March 28,2021 for one of the qualifying reasons stated above, and was not paid in the amount required under Labor Code section 248.2, they may make an oral or written request of "retroactive" payment. Employers may not deny SPSL based on lack of certification from health care providers, which is not a condition for payment. Medical certification may, however, be reasonably required before payment of SPSL when the employer has other information indicating that the employee is being dishonest or requesting leave for invalid purposes. Employers are encouraged to obtain and retain written documentation of any basis upon which they are requiring medical certification before such requirement is imposed.
6. How much leave is a full-time covered employee entitled to? An employee who is considered full-time or works at least 40 hours per week in the two weeks before the leave is taken is eligible for up to 80 hours of SPSL.
7. How much leave is a part-time employee entitled to? Part time employees are eligible for variable leave amounts based on their hours worked.
a. An employee who works a normal weekly schedule is eligible for paid leave hours equaling the total of hours they are scheduled to work over two weeks.
b. An employee who works a variable number of hours is eligible for paid leave time equal to 14 times the average number of hours the individual worked each day in the six months before the leave date. If the employee's employment is less than six months, the calculation is generally made over the entire period of employment.
8. What if an employer has already provided Covid-19 Sick Leave to covered employees? An employer who already provided Covid-19 specific SPSL for qualifying leave taken from January 1, 2021 through March 28, 2021 and paid the same rate under Labor Code section 248.2 may completely offset its obligation. If an employer provided supplemental paid sick leave for qualifying reasons, but at a lesser rate, it may receive a credit toward its requirements under Labor Code section 248.2.
9. How should an employer document Covid-19 SPSL on paystubs? Employers should list Covid-19 SPSL separate from regular Paid Sick Leave on itemized paystubs or a separate writing when wages are paid.
10. What does enforcement look like? Employers must display the required DIR poster (found here) in a conspicuous place in the workplace, or distribute the notice to remote employees through electronic means. Covered employees may file a claim or report or a violation with the Labor Commissioner's office.
11. Is Labor Code section 248.2 SPSL different than paid sick leave under FFCRA? Yes. As discussed above, paid sick leave under FFCRA expired on December 31, 2020 and employers are no longer mandated to provide it. Federal law provides tax credits for employers who choose to provide FFCRA paid sick leave. The new 2021 Covid-19 SPSL law requires employers to provide an additional 80 hours of Covid-19 related sick leave, regardless of its election to do so under FFCRA.
What Should Employers Do Now?
1. Decide whether to voluntarily provide FFCRA leave through September 31, 2021, and update company policies accordingly;
2. Ensure that decision makers are not engaging in discriminatory practices that would disqualify the employer from receiving tax credits;
3. Determine which former employees separated since November 1, 2019 may be eligible to elect COBRA coverage under ARPA’s second chance subsidy;
4. Monitor regulatory guidance from the US Department of Labor and other government agencies for form COBRA notices to provide to eligible former employees within 60 days;
5. Ensure your Payroll, HR, and supervisor staff are informed of all eligibility criteria and associated deadlines;
6. CA employers -- Provide employees with notice of Labor Code section 248.2 (found here), and written notice of available leave balances on paystubs;
7. For employers outside of CA, monitor the state legislature or consult with counsel regarding any similar state laws that may affect your business; and
8. To minimize risk, consult with legal counsel on how to implement the provisions.
WSHB’s national team of employment advisors stand at the ready to assist with any questions or concerns.