(Thanks to Veenita Raj who co-wrote this week’s Friday’s Five)
An employer’s obligation to provide mandatory paid sick and family leave under the Families First Coronavirus Response Act (FFCRA) ended on December 31, 2020. The FFCRA applies to employers with 500 or fewer employees. The payroll tax credits for employers who voluntarily decided to continue providing FFCRA leave were expanded through March 31, 2021. The American Rescue Plan Act (ARPA), effective on April 1, 2021, extends the tax credits for employers who voluntarily continue or start providing Emergency Paid Sick Leave (Paid Sick Leave) or Emergency Family Medical Leave (Family Leave) through September 30, 2021. ARPA also makes several other key changes to both the FFCRA’s Paid Sick Leave (which provides two weeks/up to 80 hours of paid leave) and Family Leave provisions (which originally provided up to 10 weeks of paid Family and Medical Leave). Here are five key impacts California employers must be aware of:
1. Changes to the Emergency Paid Sick Leave Requirements
ARPA resets the 10-day/80-hour limits for Paid Sick Leave starting April 1, 2021. This means that if employees previously exhausted their entitlement to Paid Sick Leave under the FFCRA, they now have another 10 days/80 hours to use. However, any paid sick leave not used before April 1, 2021 does not roll over.
ARPA adds three (3) qualifying reasons for Paid Sick Leave, which are:
- Obtaining a COVID-19 vaccine,
- Recovering from any illness or condition related to the COVID-19 vaccine, or
- Seeking or awaiting the results of a COVID-19 diagnosis or test if either the employee has been exposed to COVID-19 or the employer requests the test or diagnosis.
2. Changes to the Emergency Family Medical Leave Requirements
With regard to Family Leave, the ARPA made the following changes:
- Increased the number of paid weeks available to employees from ten (10) weeks under the FFCRA to twelve (12) weeks by removing the initial two-week unpaid period. This means that if an employee qualifies for family leave, he/she is eligible for 12 weeks of paid leave, assuming he/she has not previously used any family leave time.
- Increased the total paid leave tax credit available to employers for Family Leave from $10,000 to $12,000, meaning that employers can now take an additional $2,000 in payroll tax credits per employee.
- Expanded the qualifying reasons to use Family Leave. Previously, leave could only be taken by employees caring for children whose schools or place of care was closed, or whose care provider was unavailable for reasons related to COVID-19. However, starting on April 1, 2021, qualifying reasons for Family Leave also include any of the Paid Sick Leave qualifying reasons. If an employee qualifies for Paid Sick Leave and needs leave beyond the 10-day/80-hour entitlement for Paid Sick Leave, the employee could take up to an additional 12 weeks of Family Leave. Therefore, after April 1, 2021, an employee could potentially take up to a total of 14 weeks of paid FFCRA leave.
3. Caps on Payroll Tax Credit
A $511 tax credit per day, per employee, at the employee’s regular rate of pay, is available for employers providing voluntary Paid Sick Leave if the employee:
- Is on leave because of any of the newly added qualifying reasons,
- Is subject to a governmental quarantine or directed to quarantine by a medical care provider, or
- Has COVID-19 symptoms and is seeking a diagnosis.
On the other hand, if the employee is taking leave for any of the remaining Paid Sick Leave qualifying reasons, the payroll tax credit is limited to two-thirds of the employee’s regular rate of pay and is capped at $200 a day.
4. Non-Discrimination Provision
The American Rescue Plan also added a non-discrimination provision for both Paid Sick Leave and family leave. If an employer opts to voluntarily provide FFCRA leave and discriminates with respect to leave:
- In favor of highly compensated employees,
- In favor of full-time employees, or
- Based on employment tenure, then the employer will not be able to obtain tax credits for any leave paid under the FFCRA framework.
Considering the above, employers who decide to continue or start providing the voluntary FFCRA leave should make sure that the leave is being offered to all employees.
5. California Employers May be Eligible for FFCRA Tax Credit When Providing California 2021 Supplemental COVID-19 Paid Sick Leave under SB 95
As we have written about previously (here and here), California enacted SB 95 that requires employers with more than 25 employees to provide supplemental COVID-19 paid sick leave to qualifying employees. SB 95 is retroactive to January 1, 2021. California’s SB 95 paid sick leave requirement does not provide a tax credit for this paid leave requirement. However, SB 95 does permit employers to take credit for “any federal or local law in effect or that became effective on or after January 1, 2021.” This credit does not include any paid sick leave required under California’s Healthy Workplaces, Healthy Families Act of 2014. Moreover, this credit only applies if the paid leave is provided to the employee at the same rate required under SB 95 and for the same qualifying reasons as established by SB 95.
Therefore, it is possible for employers (who have more than 25 but fewer than 500 employees) to receive a tax credit for paid sick leave to the extent an employer is required to provide paid leave under California’s SB 95 and the paid leave qualifies as voluntarily leave under the FFCRA (which does provide a tax credit for qualifying leaves). However, employers must be careful in this regard, as SB 95’s qualifying reasons for leave do not exactly match up with the FFCRA’s qualifying reasons for leave. For example, SB 95 requires paid sick leave for employees who are “subject to a quarantine or isolation period related to COVID-19 as defined by an order or guidelines of the State Department of Public Health, the federal Centers for Disease Control and Prevention, or a local health officer who has jurisdiction over the workplace.” (emphasis added) The FFCRA provides a similar, but much more narrow qualifying reason for an “employee who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.” In addition, SB 95 requires employers to pay the full rate for employees for all qualifying reasons, while the FFCRA only permits a tax credit of two-thirds of the employee’s pay when they are caring for another person. Therefore, employers must carefully review the interplay between the qualifying reasons and the rate of pay calculations between SB 95 and the FFCRA when evaluating the potential for claiming tax credits for paid sick leave provided.