On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“American Rescue Act”). In addition to the widely touted direct stimulus payments and the $ 300 unemployment benefit extension, the law also renewed refundable tax credits for private employers with fewer than 500 employees under the Families First Coronavirus Response Act (FFCRA). As you may recall, the FFCRA expired on December 31, 2020, but the Consolidated Funds Act, passed in late 2020, allowed employers to continue voluntary paid sick leave and / or family and sick leave from January 1 to March 31 to offer in 2021 and receive tax credits.
Under the American Rescue Act, employers with fewer than 500 employees can voluntarily offer paid vacation related to COVID-19 and receive refundable tax credits through September 30, 2021. However, as you will see below, there have been a number of significant changes in the types and amounts of vacation available. Employers need to carefully consider whether to offer such vacation and, if so, what documentation and operational changes are required.
The following is a summary of the key vacation provisions available under the American Rescue Act:
- Extension period: Tax credits can be claimed for qualifying vacation from April 1, 2021 through September 30, 2021.
- Resetting the amount of sick leave paid: The law resets an employee’s paid FFCRA emergency leave amount to 80 hours on April 1, 2021. So if an employee took FFCRA sick leave before April 1, 2021, this does not prevent the employee from taking an additional 80 hours from sick leave between April 1 and September 30, 2021 for the reasons covered. At the time of this customer notification, it is unclear whether an employee’s 12 week medical family vacation will also be reset, but it appears that it was deliberate.
- Additional covered reasons for paid emergency leave or family and medical emergency leave: Under the FFCRA, employees were entitled to take paid emergency leave if they were unable to work (or remotely able to work) because they: (1) Have been the subject of any state, state, or local quarantine or isolation order related to COVID-19; (2) was advised to self-quarantine by a healthcare provider due to concerns about COVID-19; (3) had symptoms of COVID-19 and sought a medical diagnosis; (4) have looked after a person who was subject to an order as described in reason (1) or was advised as described in reason (2); (5) looked after their child whose school or care facility had closed or whose childcare was not available due to COVID-19 precautions; and (6) had essentially similar another state established by the federal government (none was ever reported). Under the FFCRA, employees were entitled to take family and medical leave for reason (5) only.
Under the American Rescue Act, employees can take both paid sick leave and family leave for the six reasons listed above. Additionally, employees who are unable to work (or cannot work) can take both paid sick leave and family leave for three new reasons:
- Receiving a COVID-19 vaccine;
- Recovery from any disease, injury, or condition related to any such vaccine; and
- Seeking or waiting for the results of a diagnostic test or medical diagnosis of COVID-19 because either the employee has been exposed to COVID-19 or the employer requested the test or diagnosis.
For emergency sick leave under the American Rescue Act, employees receive their regular wages for reasons (1) through (3) and (7) through (9), which is capped at $ 511 per day, and 2/3 their regular wages Remuneration that is limited to USD 200 per day for reasons (4) to (6). For all nine reasons, employees receive 2/3 of their regular pay, capped at $ 200 per day, for American Rescue Act family medical vacation leave.
- Extension of medical family leave:
- Under the American Rescue Act, every 12 weeks of family medical leave (EFMLA) are now paid leave (previously, the first two weeks under FFCRA were unpaid). Thus, an employee may now have 14 weeks of paid vacation if he or she qualifies: two weeks of sick leave and 12 weeks of family leave.
- To account for the additional two weeks of paid vacation, employers can now receive EFMLA tax credits of up to $ 12,000 per employee, increased from the previous limit of $ 10,000.
- Non-discrimination: Employers are not entitled to tax credits if the emergency sick leave or emergency family leave is offered in a manner that discriminates in favor of high-paid employees, full-time employees, or because of an employee’s tenure.
Offering emergency sick leave and / or family leave after April 1, 2021 is still voluntary. While not specifically stated in the law, it appears that employers can choose to offer emergency sick leave rather than emergency family leave. Employers who opt for Emergency Leave and / or Family Emergency Leave after April 1, 2021 should: 1) continue to record the reasons and amount of leave taken; and 2) update their forms and guidelines to reflect the take into account the above changes, in particular the additional qualifying reasons for paid sick leave and family leave. While the Department of Labor and Internal Revenue Service has not yet issued guidance on the American Rescue Act, Shumaker will continue to monitor developments and share updates as they become available.
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