The new COVID-19 stimulus package is now law. As discussed below, it provides some employers an incentive to extend certain COVID-19 related leave benefits through Q1 2021.
Optional FFCRA Tax Credits Extended Through March 31, 2021
The Families First Coronavirus Response Act (“FFCRA”), which became effective April 1, 2020, requires covered employers (generally those with fewer than 500 employees) to provide Emergency FMLA Leave and Emergency Paid Sick Leave to qualifying employees who are unable to telecommute because of specific COVID-19 related reasons. We wrote about the FFRCA’s main provisions here, and the U.S. Department of Labor’s FFCRA guidance here. Importantly, the FFCRA provides private employers with a refundable dollar-for-dollar payroll tax credit for the mandated leave. The tax credits and leave requirements were originally set to expire on December 31, 2020.
The new COVID-19 stimulus package does not extend the FFCRA’s requirement that covered employers must provide leave benefits. Accordingly, after December 31, 2020, FFCRA-covered employers may dispense of the FFCRA leave scheme entirely. However, the new COVID-19 stimulus package allows private employers looking to provide continued leave benefits into 2021 an incentive to do so: FFCRA-covered employers that elect to extend FFCRA-like benefits voluntarily may continue to reap the tax benefits associated with the program through March 31, 2021. Eligible employers may claim these tax benefits as they have through 2020 when an employee takes a qualifying leave consistent with the existing FFCRA framework under the employer’s paid leave policy. FFCRA-covered employers thus need to evaluate whether to take advantage of this incentive and extend FFCRA-like benefits through the first quarter of 2021.
Further, employees taking advantage of the FFCRA’s Emergency FMLA leave may still be entitled to regular FMLA leave in instances involving a sufficiently serious health condition associated with COVID-19, and where the employee has not otherwise exhausted FMLA leave.
Key Employer Takeaways
As the COVID-19 pandemic continues unabated into 2021, employers face a variety of vexing challenges, including how to account for employees with pandemic-related leave needs. In light of the last-minute enactment of the new COVID-19 stimulus package and the extension of FFCRA tax credits, employers now need to move quickly to evaluate whether to continue offering paid leave consistent with the FFCRA through March 31st. This determination will involve many factors and may vary widely by business and industry. Employers should consider financial hardship, administrative feasibility, potential staff shortages, employees’ telework capabilities, and virus exposure concerns in light of employers’ general duty to limit COVID-19 in the workplace. Another factor for consideration is whether the employer desires to take advantage of the tax benefits associated with FFCRA eligible leaves through March where they are already required to provide leave under other state or local leave initiatives that are not expiring at the end of 2020 (e.g., New York State’s Quarantine Leave benefits, which we discussed here). Where these leaves can run concurrently, employers may wish to utilize the tax benefits associated with FFCRA leave for the next three months.
After coming to a decision, employers should revise leave policies as appropriate, notify employees in advance of any leave policy changes, and work with their payroll teams and providers to implement any changes.
As a final note, employers should be aware that leave benefits might well change on the federal, state, and/or local level as the COVID-19 pandemic progresses. And, with a new Congress and the incoming Biden Administration, federal benefits may be extended again or modified in material ways in the coming months. We will keep you informed of any significant changes here.