Employer Rights Under the American Rescue Plan Act

The recently passed American Rescue Plan Act of 2021 (ARPA) extends previously available tax credits through 9/30/21 for employers who voluntarily offer Covid related paid leave, provides involuntarily terminated employees 6 months of COBRA at no cost, and expands certain unemployment compensation programs.

When the Families First Coronavirus Response Act (FFCRA) was passed in March 2020 it required employers with less than 500 employees to provide Emergency Paid Sick Leave (EPSL), and Emergency Family and Medical Leave (EFMLA), through 12/31/20. Employers received a tax credit for any monies paid for EPSL or EFMLA. Under the Consolidated Appropriations Act of 2020 (CAP), such employers were no longer required to provide EPSL or EFMLA beyond 12/31/20, but those who voluntarily did so were permitted to continue taking tax credits through 3/31/21.

Under the ARPA, such employers may voluntarily extend EPSL and EFMLA leave rights through 9/30/21, and continue receiving tax credits through such date for doing so. The ARPA also makes some substantive changes to both the EPSL and EFMLA provisions, however, providing these benefits are completely at the discretion of the employer.

In addition to the 6 initial reasons for EPSL, the ARPA extends the categories of paid leave (up to 10 days) to periods when the employee is getting a Covid-19 vaccine, recovering from any complications due to the vaccine, or the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of COVID–19, after such employee has been exposed to COVID–19, or the employer has requested such test or diagnosis.

Further, the EFMLA now permits paid time off of up to 12 weeks, instead of the prior 10 weeks, not only for the prior reasons of a school closing or loss of childcare services, but for all reasons covered by the EPSL. Any pay under the EFMLA is limited to 2/3 of earnings up to $200/day, or $12,000 for 12 weeks.

These changes effectively provide up to 14 weeks of pay, with the first 2 weeks (EPSL) paid at either 2/3 to $200/day, or 100% to $511/day, depending on the reason, and the final 12 weeks (EFMLA) paid at 2/3 to $200/day, regardless of the reason.

In addition, under the ARPA, employees who may have exhausted some or all of their 80 hours of leave under the EPSL will, effective 4/1/21, be eligible for a new 80 hours of EPSL entitlement. Employees who have only used a portion of their 80 hours prior to 4/1/21 cannot carry over the unused hours, and will only be eligible for a total of 80 hours effective 4/1/21.

To receive the tax credits, employers may not discriminate in the way employees qualify for EPSL or EFMLA. As such, employers may not discriminate in favor of highly compensated employees, full-time vs. part-time employees, or based on length of service.

Separately, employees involuntarily terminated, or suffering a voluntary or involuntary reduction in hours making them eligible for COBRA, are now entitled to fully paid COBRA from 4/1/21 through 9/30/21. This paid COBRA right is not discretionary and must be provided to any employee meeting the involuntary separation, or reduction of hours criteria. Employees who were COBRA eligible before 4/1/21, but who declined coverage or dropped coverage, must be sent a new enrollment notice to cover the period from 4/1/21 through 9/30/21. The U.S. Department of Labor has developed model notices for employer use. Employers may recover the costs they pay for COBRA through a tax credit. The COBRA subsidy is non-taxable to the employee. The COBRA benefits also apply to smaller employers, with less than 20 employees, who are subject to Connecticut’s benefit continuation statute (Mini-Cobra).

Finally, the ARPA extends the 3 unemployment compensation programs springing from the Covid pandemic. These include the Pandemic Unemployment Assistance Act (PUA) that covers individuals typically not eligible for unemployment compensation like self-employed workers, or those unable to work due to a Covid related reason, which has been expanded from 50 to 79 weeks of benefits; the Federal Pandemic Unemployment Compensation Act (FPUC), which currently provides a $300 weekly supplement through 9/6/21; and the Pandemic Emergency Unemployment Compensation Act (PEUC), which provides 53 weeks of additional unemployment compensation to those whose 26 weeks of state benefits have expired, for a total of 79 weeks of unemployment compensation. The ARPA also makes the first $10,200 of unemployment compensation federally tax free to employees (single or married) with a 2020 adjusted gross income of under $150,000. Each spouse can take a $10,200 exemption.