Paid Leave and Coronavirus—Part 23: Congress Expands Tax Credits for Voluntary Families First Coronavirus Response Act (“FFCRA”) Leave and Vaccine-Related Absences

Seyfarth Synopsis: Buried deep within the $1.9 trillion American Rescue Plan Act of 2021, signed into law on March 11, 2021, are several provisions related to tax credits that may help private employers with fewer than 500 employees continue weathering the financial burden of COVID-19 related employee absences. One such example involves an extension and expansion of tax credits for (now voluntary) COVID-19 paid leave under the Families First Coronavirus Response Act (“FFCRA”), which includes a corresponding broadened scope of qualifying absences for FFCRA emergency paid sick leave and paid family leave, namely for certain vaccine-related absences.

The American Rescue Plan Act of 2021 (“ARP”), while putting $1,400 payments in the pockets of many Americans, also contains several helpful tax credits to assist covered employers weather the continuing storm of COVID-19.

As previously reported,[1] the FFCRA generally required private-sector employers with fewer than 500 employees[2] to provide emergency paid sick leave and expanded paid family leave to eligible employees who were absent for certain qualifying reasons related to COVID-19.[3]  Those paid leave requirements expired at the end of 2020. 

Through the December 2020 stimulus bill, known as the Consolidated Appropriations Act of 2021, employers subject to FFCRA mandates in 2020 who voluntarily continued to offer FFCRA paid leave into 2021 were afforded an extension of the corresponding tax credits for qualified wages provided by an employer for such paid leave through March 31, 2021.

Now, under the ARP, effective April 1, 2021, tax credits for voluntarily provided FFCRA qualifying paid leave have been enhanced in several respects. Here are the highlights:

• Extended Tax Credit Period. The tax credits (subject to the below conditions) are now available to covered employers through September 30, 2021.
• New Leave Year for FFCRA Paid Sick Leave. The FFCRA paid sick leave allotment (e.g., 10 days) for which the tax credit can be taken resets as of April 1, 2021. This means that an employer can claim tax credits for FFCRA paid sick leave voluntarily provided to an employee on or after April 1, 2021, even though the employee exhausted FFCRA paid sick leave entitlements prior to March 31, 2021. 
• Paid Leave Must Follow FFCRA Substantive Requirements. In order for a covered employer’s voluntary FFCRA paid leave to be considered qualifying wages for tax credit purposes, the employer must generally comply with the requirements of the FFCRA’s paid leave mandates when providing the time off.
• New Qualifying Reasons for FFCRA Paid Leave. FFCRA paid leave qualifying wages provided by a covered employer to employees for which the tax credit may be taken as of April 1 have been expanded to include the following absences: (a) 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; (b) the employee is obtaining a COVID-19 vaccination; or (c) the employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccination.  These expanded reasons apply to both paid sick leave and paid family leave.
• Expansion of FFCRA Paid Family Leave to Include Paid Sick Leave Qualifying Reasons. Qualifying paid family leave reasons now also include all of the qualifying paid sick leave reasons (e.g., quarantine or treatment due to COVID-19 diagnosis or symptoms, care for a family member with COVID-19 diagnosis or symptoms, etc.).  Previously, only absences for childcare due to COVID-19 school or place of care closure or childcare provider unavailability, qualified for the 10 additional weeks of FFCRA paid family leave beyond the two weeks of FFCRA paid sick leave.  
• Amount of Paid Leave for Which Tax Credit is Available.
  • Paid Sick Leave. As noted above, beginning on April 1, 2021, covered employers are eligible to receive tax credits for up to 10 days of voluntarily provided qualifying paid sick leave. Also as noted above, covered employers' entitlement to FFCRA paid sick leave tax credits reset as of April 1, 2021. Paid sick leave tax credits are based on an employee’s regular rate of pay and capped at either $511 or $200 per day, depending on the nature of the absence. The $511 daily cap applies for (a) any of the expanded absences described in the “New Qualifying Reasons for FFCRA Paid Leave” section above (i.e., the new vaccine-related absences) and (b) the first three covered absences under FFCRA’s original paid sick leave mandate (i.e., absences for the employee’s own needs related to COVID-19) (see Footnote 3 for specifics). The $200 daily cap applies for all other covered absences under the FFCRA’s original paid sick leave mandate (i.e., absences to care for another individual related to COVID-19) (see Footnote 3 for specifics).
  • Paid Family Leave. An employer also can receive up to a $12,000 tax credit per employee for qualifying FFCRA paid family leave absences. This maximum cap has been increased from its prior ceiling of $10,000 per employee.  Correspondingly, the ARP has removed the initial two week unpaid period of family leave under the FFCRA.  The tax credit for qualifying paid family leave wages, which includes covered absences under the FFCRA’s original paid family leave mandate and expanded absences based on the ARP (see above), is calculated at 2/3 of the employee’s regular rate of pay, capped at a daily maximum of $200.

Importantly, all FFCRA leave remains voluntary, as it has been since January 1, 2021.  Covered employers may, however, find the corresponding tax credits beneficial to their bottom lines, as employees’ needs for COVID-19 related absences and the battle for COVID-19 persist.

With the COVID-19 and paid leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with COVID-19 paid leave laws, and paid leave requirements more generally. Consult Seyfarth’s COVID-19 Resource Center for updated information regarding the rapidly evolving COVID-19 situation and its impact on the workplace.

To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list. Companies interested in Seyfarth’s paid sick leave laws survey should reach out to paidleave@seyfarth.com.

 

[1] For more information on Seyfarth’s coverage of the FFCRA’s paid leave mandates, you can review our prior Legal Updates here, here, here, here and here.

[2] The FFCRA paid leave mandates also applied to certain public employers.

[3] Covered paid sick leave absences under the FFCRA included absences when the employee was unable to work (or telework) due to a need for leave because they: (1) were subject to a Federal, State, or local quarantine or isolation order related to COVID-19; (2) had been advised by a health care provider to self-quarantine due to concerns related to COVID-19; (3) were experiencing symptoms of COVID-19 and seeking a medical diagnosis; (4) were caring for an individual who was subject to an order as described in reason (1) or has been advised as described in reason (2) (as described above); (5) were caring for their child whose school or place of care had been closed, or child care provider was unavailable, due to COVID-19 precautions; and (6) were experiencing any other substantially similar condition specified by the federal government. By comparison, expanded paid family leave under the FFCRA was only available for absences where the employee was unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care had been closed, or the child care provider of such son or daughter was unavailable, due to a public health emergency.