Devine Millimet | NH Law Firm

New COVID-19 Relief Bill Extends Tax Credit for Employers Voluntarily Providing FFCRA Leave to 9/31

Lynnette V. Macomber, Esq.

March 19, 2021

The American Rescue Plan Act of 2021, signed into law on March 11, 2021, is the most recent COVID-19 relief bill passed by Congress.  Employers should be aware that the Act extended the tax credit available to employers for qualifying paid sick leave. This tax credit, which was initially created by the Families First Coronavirus Response Act (FFCRA) was set to expire on March 31, 2021; it has been extended to September 30, 2021, though Congress has not extended the FFCRA’s mandate requiring employers to provide such leave.

Remind me – what is the FFCRA?

The FFCRA was part of the very first coronavirus relief bill, passed in haste in March of 2020.  The FFCRA requires certain employers[1] to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19.  Covered employers were obligated to provide qualifying leave if appropriately requested by the employee between April 1, 2020, and December 31, 2020, but this mandate expired on December 31, 2020. 

The Employer Tax Credit

To offset the FFCRA paid leave mandate, Congress allowed employers providing such leave to take a dollar-for-dollar reimbursement, through tax credits, for all qualifying benefits paid under the FFCRA. 

Although the obligation to provide FFCRA leave ended on December 31, 2020, the Consolidated Appropriations Act of 2021 (passed on December 27, 2020), extended the employer tax credit to March 31, 2021 for covered employers that voluntarily provided paid sick leave or paid family leave under the FFCRA’s terms.

The Latest (March 2021) COVID-19 Relief Bill

The March 2021 relief bill extended the tax credit, this time to September 30, 2021, and expanded the qualifying reasons for both Paid Family Leave (PFL) and Paid Sick Leave (PSL) under the original FFCRA.  Qualifying leave now includes leave for an employee who is:

  • Obtaining a COVID-19 vaccine;
  • Recovering from an injury, disability, illness or condition related to vaccination; or
  • Seeking or awaiting the results of a diagnostic test or medical diagnosis of COVID-19, either due to exposure to the virus, or because the employer requested the testing.

The bill does not obligate employers to provide PFL or PSL under the FFCRA; rather, the extension of the tax credit operates as a partial incentive for employers to voluntarily choose to do so. 

Notably, the new law contains an anti-discrimination provision, which requires that an employer voluntarily providing paid leave must offer it to all employees, including new hires and part-time employees.  In other words, if an employer chooses to provide voluntary FFCRA leave, it must do so uniformly.  However, the employer can still decide whether to provide PSL and not PFL, or vice-versa.

What if the Employer Already Provided Paid Sick Leave?

Importantly, the Act also resets the 10-day limit on the available tax credit for paid sick leave starting April 1, 2021.  This means that employers may voluntarily provide employees up to 10 additional days of PSL in the period from April 1, 2021 through September 30, 2021, even if the employee previously exhausted their initial PSL allocation prior to April 1, 2021, and the employer may nevertheless be eligible for the corresponding tax credit. 

Employer Takeaway

Employers are not obligated to provide FFCRA leave as a result of the latest relief bill.  Instead, the bill extends the tax credit available to employers that voluntarily provide FFCRA leave to September 30, 2021, expands the qualifying reasons for providing leave related to COVID-19, and resets the ten-day cap on the employer tax credit for paid sick leave starting April 1, 2021.

Employers that were subject to FFCRA will want to determine whether to voluntarily provide paid sick leave and/or paid family leave to their employees through September 30, 2021, in light of the available tax credit.  Employers opting to provide leave should plan to offer leave to all employees regardless of compensation or part-time status, and should anticipate forthcoming IRS guidance with respect to claiming the employer tax credit.  Employers will also need to be aware of any state laws affecting their obligation to provide leave to employees.

Please contact any of the attorneys in Devine Millimet’s Labor & Employment Practice Group with questions regarding COVID-19 compliance matters.

[1] The FFCRA applies to private employers that employ less than 500 employees, including not-for-profit organizations, and to certain public employers regardless of the number of employees.  Review this US DOL Guidance to determine if you are a covered employer.  There are exemptions from FFCRA requirements for certain qualifying small businesses with fewer than 50 employees, and for employees who are healthcare providers or first responders.

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