The American Rescue Plan Act of 2021: Critical Update for Employers Voluntarily Providing Paid COVID Leave

As discussed in our prior alerts, effective April 1, 2020, the Families First Coronavirus Response Act (“FFCRA”) required most employers with fewer than 500 employees to provide qualifying employees with paid emergency sick leave and emergency family and medical leave for COVID-19 related reasons. These paid leave obligations were set forth in two laws created by the FFCRA: the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLEA”). As originally enacted, employers’ paid leave obligations under the EPSLA and EFMLEA were set to expire on December 31, 2020. However, in a stimulus package signed into law in late December 2020, the FFCRA’s expiration date for paid leave benefits was extended on a voluntary basis. Specifically, pursuant to the stimulus package, employers were permitted to provide qualifying employees with FFCRA paid leave benefits on a voluntary basis through March 31, 2021 and obtain refundable tax credits for the cost of providing such leave to employees.

Once again, that deadline has been extended for employers who voluntarily wish to provide paid leave benefits to their employees for COVID-19 related reasons. On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the “Rescue Plan” or the “Act”). Pursuant to the Act, which is effective April 1, 2021, tax credits for private employers with fewer than 500 employees who voluntarily decide to provide paid leave under the EPSLA and EFMLEA are extended through September 2021. Effective April 1, 2021, employees of participating employers will have their FFCRA leave banks replenished and will qualify for up to 80 hours of paid leave under the EPSLA and up to 12 weeks of paid leave under the EFMLEA. The Act extends the availability of payroll tax credits to participating employers from March 31, 2021 through September 30, 2021, and makes the following key changes to the paid leave provisions of the EPSLA and EFMLEA:

Expansion of Qualifying Reasons for Leave. Initially, under the EPSLA, qualifying employees could take paid sick leave when the employee was:

  • Subject to a federal, state or local quarantine or isolation order related to COVID-19;
  • Advised by a health care provider to self-quarantine due to COVID-19 concerns;
  • Experiencing COVID-19 symptoms and seeking medical diagnosis;
  • Caring for an individual subject to a federal, state or local quarantine or isolation order or who had been advised by a health care provider to self-quarantine due to COVID-19 concerns;
  • Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency; or,
  • Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Of those six qualifying reasons, leave under the EFMLEA could previously only be taken for the fifth qualifying reason, i.e. caring for a child due to the closure of the child’s school or daycare. Under the Rescue Plan, the above six qualifying reasons for leave remain in place. Beginning April 1, however, employees may qualify for EFMLEA leave for all of the above six qualifying reasons, and not just to care for their child as a result of a COVID-related school or daycare closure.

Additionally, the Rescue Plan provides that leave under the EPSLA and EFMLEA may now be taken for an additional three qualifying reasons:

  • The employee is 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 the employee’s employer has requested such test or diagnosis;
  • The employee is obtaining immunization related to COVID-19; and,
  • The employee is recovering from any injury, disability, illness, or condition related to such immunization.

Increase in Length and Amount of Paid Leave Benefits. While under FFCRA, the first two weeks of the 12 weeks of leave under the EFMLEA were unpaid, the Rescue Plan provides that employees who qualify for leave under the EFMLEA are now eligible for 12 full weeks of paid leave instead of 10 weeks. Thus, under the Rescue Plan, employees could potentially obtain a total of 14 weeks of paid leave (i.e. 80 hours under the EPSLA and 12 weeks under the EFMLEA.) The Act also raises the aggregate cap on EFMLEA leave from $10,000 to $12,000.

Establishment of Strict Non-Discrimination Rules. The Act makes it clear that no tax credit is available if the employer, in determining availability of paid EPSLA and EFMLEA leave to its employees, discriminates in favor of highly compensated employees, full-time employees, or employees with greater tenure. As such, employers who choose to provide paid leave in accordance with the Act must do so uniformly as to all employees.

Importantly, many states, including New Jersey and New York, have mandatory sick leave laws requiring employers to provide leave benefits for COVID-related reasons. Accordingly, employers must consider whether these laws entitle employees to leave and consult counsel as to requirements under any state and/or local laws.

In light of the Act, employers must immediately decide whether they want to voluntarily provide COVID leave benefits under the EPSLA and EFMLEA through September 30, 2021. Employers who elect to do so should then review and update their policies and procedures and prepare to respond to and accommodate employee questions or requests related to the leaves of absences precipitated by the continuing coronavirus pandemic.

Related Services