The New Year brought a new COVID-19 Relief Act (the “Act”). With several aid packages imminent, Congress answered questions about which services will continue (and which will not) in 2021. Here’s what employers need to know about the new law.
Emergency paid leave and family and sick leave
First, a quick refresher on the first COVID-19 aid package. In March 2020, Congress passed the Families First Coronavirus Response Act (FFCRA). This law entitles employees, among other things, to up to 80 hours of paid sick leave, two weeks of unpaid family and sick leave and ten weeks of paid family leave. For more information on FFCRA’s Paid Vacation Policy, see our previous article.
The new law does not guarantee that these paid vacation benefits will continue to be paid in the future. From January 1, 2021, employers are no longer obliged to provide these benefits to employees.
Employer’s tax credits
Although paid vacation benefits are no longer mandatory, employers may still want to provide the same benefits to employees in order to receive tax credits. The FFCRA provided a tax incentive for insured employers: Eligible employers could reduce their quarterly federal dollar-based tax liability, which is equal to the total qualifying vacation wage paid to workers on Emergency Paid Leave (EPSL) and extended family and extended leave after Medical Leave Act (EFMLA) (i.e. up to $ 200 / day / employee for used EPSL and up to $ 511 / day / employee for used EFMLA). Under the new law, eligible employers can continue to receive the same tax credit from January 1, 2021 through March 31, 2021 if an employee takes vacation under the FFCRA.
For the most part, the law sets out many of the same requirements employers must meet in order to receive the tax credit. Employers should consider some specifics of the law related to this paid vacation option:
- The 80-hour and 12-week entitlements according to EPSL and EFMLA will not restart from January 1, 2021. As a result, employees can only take such vacation to the extent that they still have vacation from 2020.
- The IRS continues to require the same documentation to support the tax credit application so employers must keep the same records.
- In order to receive the tax credit, employers must comply with the FFCRA’s requirements for re-employment.
- Employers must not discriminate against or retaliate against workers who take vacation that would be covered by the FFCRA.
Whether an employer should continue to grant qualified leave in exchange for a tax credit depends on an individual assessment of each company. Interestingly, employers have the option to tailor these programs to best suit their business needs as the provisions of the Paid Vacation Act are inconsistent with the provisions of the FFCRA. For example, employers now have greater discretion to set different requirements for vacation eligibility, subject to applicable anti-discrimination protections. Employers should consider, among other things, their staffing needs, the administrative requirements for obtaining the tax credit, other state and local vacation laws, and the effect on work ethic. In any event, employers should review their paid vacation policies to ensure they adequately reflect the employer’s paid vacation programs, and distribute new policies to employees at the start of the new year if necessary, along with any other major policy changes that may be in effect will occur in 2021.
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