As communicated in the March HR Special Alert, under the American Rescue Plan, employers with fewer than 500 employees have the option to voluntarily continue to offer FFCRA Emergency Paid Sick Leave (EPSL) and Emergency FMLA (E-FMLA) and receive a tax credit for such paid leave. Tax credits will be available for qualified leave taken through September 30, 2021. HR Works has been fielding numerous questions from clients on the benefits and potential drawbacks of continuing to offer FFCRA.
Let’s start with the positives. Providing paid leave to help employees who can’t work (or telework) due to a COVID-19-related reason is probably “the right thing to do,” particularly when the need for leave is short-term and it doesn’t pose a significant impact on the operations of the business. This Act gives employers the ability to provide a paid leave benefit that is ultimately funded by the government through the tax credit.
Additionally, where the qualifying reason is also a covered under a mandatory paid state leave, by voluntarily extending FFCRA, employers can receive a tax credit for leave they would otherwise be required to pay under state law without a tax credit or other reimbursement. For example: NY employers are now required to provide paid leave (up to four hours per vaccine injection) for employees to obtain their COVID-19 vaccination. Under the American Rescue Plan, in addition to the six ESPL reasons for leave set forth in the FFCRA, the Act added additional qualifying reasons for leave including:
- Obtaining an immunization related to COVID-19;
- Recovering from any injury, disability, illness or condition related to such immunization; or
- Seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, when such employee has been exposed to COVID-19 or the employer has requested such test or diagnosis.
Therefore, when a NY employer pays an employee for time off for their COVID-19 vaccination, that time can also count as EPSL and thus the employer’s pay obligation under state law is essentially reimbursed through the tax credit.
That said, there are some potential challenges with extending FFCRA that should be considered.
One important point for employers opting to continue offering this voluntary leave is that an employee’s EPSL hours reset on April 1, 2021, effectively providing all employees a new bank of (up to) 80 hours, regardless of whether the employee had previously taken EPSL.
Furthermore, previously, tax credits taken by employers to cover the cost of providing emergency FMLA (E-FMLA) was only available if the employee was unable to work (or telework) to care for their child whose school or place of care has been closed or was unavailable due to the public health emergency. Under the American Rescue Plan, E-FMLA can be taken for any of the reasons set forth in the FFCRA, including the expanded reasons described above, and the reasons previously only available for EPSL. That may result in a lot of paid leave for an employee. While employers will get the benefit of the tax credit (and thus are not the ones ultimately paying for the leave), businesses will have to assess if they can “afford” to have employees out of work for that amount of time, given the numerous reasons that may qualify for the leave.
In cases where there are staffing concerns, employers may want to consider only extending EPSL (up to 10 days) and not the E-FMLA portion of the FFCRA. It’s important to note, there is no clear guidance to date whether this is a permissible practice. Presumably, since offering FFCRA leave is voluntary, employers could make that choice, however, this option is not explicated stated in the regulations. If an employer opts for this decision, the key is consistency and communication since the Act also includes new non-discrimination rules for employers who opt to provide FFCRA leave and obtain the tax credits. Specifically, the Act disallows the tax credits for any employer who discriminates with respect to leave: (1) in favor of highly compensated employees (as that term is defined in Section 414(q) of the Internal Revenue Code); (2) in favor of full-time employees; or (3) based on employment tenure.
As such, employers who choose not to offer EPSL, E-FMLA or both, are encouraged to communicate that decision to employees as soon as possible to ensure employees are aware of the employer’s decision on voluntarily continuing (or discontinuing) FFCRA leave and any requirements on requesting leave, as applicable.
Another consideration, and a point that remains unclear, is whether E-FMLA counts against an employee’s regular (traditional) FMLA allotment (for eligible employees of FMLA-covered employers – those with 50 or more employees). There is currently no guidance on this whatsoever. Certainly, if the reason for E-FMLA also qualified under (traditional) FMLA, the two would run concurrently. However, in a situation where E-FMLA is being taken and it’s not a traditional FMLA qualifying reason, the conservative approach would be to not count E-FMLA against an employee’s (traditional) FMLA allotment. Such practice could, however, create a situation where an employee may be eligible for a significant amount of leave in a 12-month period. Because the US Department of Labor has yet to issue guidance on this point, employers should speak with their own legal counsel on the best way to approach this situation.
Next Steps for Employers
Employers should weigh their options and consider whether there is a benefit to their organization to continue to offer EPSL and/or E-FMLA under the law. Employers who choose to continue to offer leave should also review their policies and procedures to ensure that they are compliant with the new changes made by Act and communicate such decision(s) to avoid running afoul of the non-discrimination rules.
If the decision is made to continue FFCRA leave for tax credit purposes, reset all employees’ EPSL “bank” as of April 1, 2021 and retain all leave request forms and other documentation for tax credit purposes.
Employers should also keep in mind that in addition to leave under the FFCRA, many state and local governments enacted similar paid COVID-leave laws and ordinances which may still be in effect. For New York employers, the state’s COVID-19 Paid Sick Leave does not have an expiration date and presumably continues until an announcement from the state that said provision is no longer in effect.
For more information related to this legislative update, watch our webinar American Rescue Plan Act 2021: Requirements and Considerations for COBRA and FFCRA.
Employers may contact HR Works for assistance with navigating the expanded and extended laws for FFCRA, and for support with their state and federal leave administration needs.