The new year brought a new COVID-19 relief law (the "Law"). With the expiration of several relief packages looming, Congress answered questions about which benefits will (and will not) continue in 2021. Here is what employers need to know about the new Law.
Emergency Paid Sick Leave and Family and Medical Leave
First, a quick refresher on the initial COVID-19 relief package. In March 2020, Congress passed the Families First Coronavirus Response Act (FFCRA). That law entitled employees to, among other things, up to 80 hours of paid sick leave, two weeks of unpaid family and medical leave, and ten weeks of paid family leave. See our previous article here for more details on the FFCRA paid leave provisions.
The new Law does not guarantee these same paid leave benefits moving forward. Effective January 1, 2021, employers are no longer obligated to provide these benefits to employees.
Employer Tax Credits
Although the paid leave benefits are no longer mandatory, employers may still want to provide the same benefits to employees in order to obtain tax credits. The FFCRA provided a tax incentive for covered employers: eligible employers could reduce their quarterly federal employment tax liability on a dollar-for-dollar basis equivalent to the total qualified leave wages paid to employees for emergency paid sick leave (EPSL) and expanded Family and Medical Leave Act (EFMLA) leave (i.e., up to $200/day/employee for used EPSL and up to $511/day/employee for used EFMLA). Under the new Law, from January 1, 2021 through March 31, 2021, if an employee takes leave that would have been covered under the FFCRA, eligible employers may still receive the same tax credit.
For the most part, the Law establishes many of the same requirements employers must meet to receive the tax credit. Employers should keep in mind some of the Law's specifics on this paid leave option:
- The 80-hour and 12-week entitlements under the EPSL and EFMLA do not restart beginning January 1, 2021. As a result, employees will be able to take such leave only to the extent they have leave remaining from 2020.
- The IRS will still require the same documentation to support the application for the tax credits, so employers must maintain the same records.
- In order to receive the tax credit, employers must abide by the FFCRA's job reinstatement requirements.
- Employers may not discriminate or retaliate against any employee who takes leave that would have been covered under the FFCRA.
Whether an employer should continue to provide qualifying leave in exchange for a tax credit depends upon an individualized assessment of each business. Interestingly, since the Law's paid leave provisions are not the same as those stipulated by the FFCRA, employers have the opportunity to mold these programs to best fit their business needs. For example, employers now have greater discretion to establish different leave eligibility requirements, subject to applicable antidiscrimination protections. Employers should consider, among other things, their staffing needs, the administrative requirements for claiming the tax credit, other state and local leave laws, and the impact on employee morale. Either way, employers should review their paid leave policies to ensure they properly reflect the employer's paid leave programs and distribute new policies to employees, if needed, at the beginning of the new year, along with any other major policy changes that will got into effect in 2021.