COVID-19 Update: FFCRA’s Mandatory Paid Leave Provisions Expiring December 31st; Tax Credits Extended Until March 31, 2021

Setnor Byer Insurance & Risk

On December 27, 2020, the second major coronavirus stimulus package was signed into law. The COVID-Related Tax Relief Act of 2020 includes a number of relief measures to address the health and economic impacts of the COVID-19 pandemic. But, what about the Families First Coronavirus Response Act’s mandatory paid leave requirements? Have they been extended or will they expire on the last day of the year? Congress, it seems, agreed to compromise. Although the final bill did not extend the FFCRA’s mandatory paid leave requirements, it did extend the payroll tax credit for employers opting to voluntarily provide paid COVID-19 leave until March 31, 2021.

The FFCRA’s two paid sick leave laws—the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act–generally require employers with fewer than 500 employees to provide paid leave to employees who are unable to work for qualifying reasons related to COVID-19. Eligible employees may receive up to 80 hours of paid sick leave and up to 10 weeks of paid family and medical leave. To offset the cost of providing paid COVID-19 leave, the FFCRA includes a payroll tax credit equal to 100 percent of the qualifying wages paid by employers to eligible employees.

As of January 1, 2021, the FFCRA’s paid leave provisions will be voluntary, not mandatory. Employers, however, have been given an incentive in the form of dollar-for-dollar payroll tax credits to continue providing paid leave pursuant to the FFCRA until March 31, 2021.

Employers considering this option must note that the extended tax credits are only available for paid leave that meets all the requirements of the FFCRA. Employers, for example, cannot claim tax credits for paid leave that is given for reasons other than those allowed under the FFCRA or that exceeds the limits set forth in the FFCRA (amount, duration, etc.). Additionally, the final bill does not refresh or replenish the amount of paid leave an employee can take under the FFCRA, so employers cannot claim tax credits for wages paid to an employee in excess of 80 hours or 10 weeks.

It’s unclear whether interpretive regulations will be issued in the near future. Nevertheless, employers must now decide whether to continue providing paid COVID-19 leave under the FFCRA beyond December 31, 2020. As always, employers should proceed cautiously to avoid harmful and costly errors. Employers should also have Employment Practices Liability Insurance to protect against various employment-related claims. Please contact us to learn more about EPLI coverage.