The American Rescue Plan Act is a $1.9 trillion relief bill signed recently by President Biden that has several provisions aimed at assisting small businesses.
Let’s look at how the legislation will help businesses and individuals in the area of employment law because there are several provisions that impact small and large workplaces alike.
Voluntary Paid Leave Programs
Under the Families First Coronavirus Response Act (FFCRA) that was passed in March of last year, companies with fewer than 500 employees had to provide paid leave under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Act to employees who couldn’t return to work for several COVID-19 related reasons. The FFCRA provided employers with a refundable tax credit to be used to offset their costs of providing the paid leaves.
This requirement to provide paid leave expired for employers with fewer than 500 employees on December 31, 2020. However, employers may continue to voluntarily choose to provide FFCRA paid sick or paid family leave to employees and get refundable tax credits for costs related to providing the leave through March 31, 2021.
Employers should be aware that the American Rescue Plan Act of 2021 makes these additions and amendments:
Refundable Tax Credits
These tax credits are now available through September 30, 2021. Employers who elect to voluntarily provide FFCRA paid sick or paid family leave may now receive refundable tax credits through the end of September.
New Covered Reasons for Providing Paid Sick Leave
The new relief legislation also expands the list from six reasons for paid sick leave covered under the FFCRA to now permitting employers to provide leave to employees for three more reasons:
- Obtaining a COVID-19 immunization;
- Recovering from an injury, disability, illness, or condition connected to an immunization; or
- Waiting for the results of a COVID-19 test or diagnosis when the employee has either been exposed to COVID-19, or the employer has asked for the test or diagnosis.
Before under the FFCRA, qualifying reasons for providing paid sick time were just when the employee was unable to work (or telework) due the following:
- The employee is subject to a federal, state, or local quarantine or isolation related to COVID-19;
- The employee was told by a healthcare provider to self-quarantine;
- The employee has experienced COVID-19 symptoms and is seeking a diagnosis;
- The employee is caring for a person who’s subject to quarantine or is self-quarantining;
- The employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) because of COVID-19; or
- The employee is experiencing any other substantially similar condition specified by the U.S. Secretary of Health and Human Services.
More Covered Reasons for Providing Paid Family Leave
The number of reasons for providing emergency family leave is expanded. Tax credits were available initially to employers for providing paid family leave only if the employee was unable to work (or telework) to care for a child whose school or place of care was closed or unavailable because of the public health emergency. But the Act provides that employers can claim tax credits for providing family leave that occurs from any of the six qualifying reasons provided for in the FFCRA and the additional three reasons added under ARPA (see directly above).
The Duration of Paid Sick and Family Leave for Receiving Tax Credits
The ARPA lets employers get the tax credit for providing up to 10 days of paid sick leave beginning on April 1, 2021. That’s regardless of whether the employer already took a tax credit for providing paid sick leave to an employee for a covered reason prior to that date. Plus, employers can get a tax credit for providing up to 12 weeks of paid family leave.
The Amount of Tax Credits Available for Paid Sick Leave
Employers who provide voluntary paid sick leave have received a tax credit of up to $511 a day, at the employee’s regular rate of pay if the employee is on leave because of coronavirus quarantine, self-quarantine, or has symptoms. The ARPA now has the additional covered reasons (see above) for receiving tax credits at the employee’s regular rate of pay.
For any other paid sick leave reason, the amount of tax credit available to an employer is calculated at ⅔ the employee’s regular rate of pay up to $200 a day.
The Amount of Tax Credits Available for Paid Family Leave
Employers that give paid family leave get a tax credit up to $200 a day at ⅔ the employee’s regular rate of pay for leave that’s due to any of the covered reasons for providing paid family leave. The new relief law also eliminates the two-week waiting period (during which the leave was unpaid) for taking paid emergency family leave.
Plus, the Act ups the cap on the aggregate paid leave from $10,000 to $12,000. As such, employers can now take an additional $2,000 in tax credits per employee for providing qualifying leave.
New Non-Discrimination Rules
Employers who voluntarily provide leave and get tax credits must also adhere to a new non-discrimination rule. The rule makes the tax credit available only to employers who provide leave to all employees without discriminating against certain categories of workers.
Moreover, the tax credit isn’t available to those employers who discriminate:
- in favor of highly-compensated employees;
- full-time employees; or
- based on the employment tenure of the employee.
More Unemployment Insurance Programs
The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted on March 27, 2020, created three primary unemployment insurance programs: Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA), and Federal Pandemic Unemployment Compensation (FPUC).
The Consolidated Appropriations Act of 2021 created one more: the Mixed Earner Unemployment Compensation (MEUC). The ARPA makes some significant changes to each of these programs:
Pandemic Emergency Unemployment Compensation
This program gives more assistance to people who’ve exhausted their state law unemployment benefits.
Under the CARES Act, the benefits provided eligible individuals up to 13 weeks of benefits and was going to expire at the end of December 2020. The Consolidated Appropriations Act extended benefits to up to 24 weeks and through March 14, 2021. Noe the ARPA extends benefits up to 53 weeks through September 6, 2021.
Pandemic Unemployment Assistance
This program provides assistance to the unemployed who aren’t eligible for regular or unemployment insurance. This may include business owners, self-employed workers, independent contractors, those who do not have enough of a work history, and those who may not be covered by the regular unemployment compensation, or aren’t covered by the unemployment compensation programs under state laws.
This program originally provided up to 39 weeks of unemployment benefits and were going to expire under the CARES Act at the end of 2020. But the program was extended under the Consolidated Appropriations Act to provide up to 50 weeks of unemployment benefits through March 14, 2021. The ARPA will now give up to 79 weeks of unemployment benefits (and up to 86 weeks for those in states with high levels of unemployment) and is extended through September 6, 2021.
Mixed Earner Unemployment Compensation
This program is for freelancers and gig economy workers. It provides financial assistance to individuals who receive at least $5,000 in self-employment income, who aren’t getting benefits under the PUA, and who are eligible to receive at least one dollar in state unemployment benefits during the time period covered by the program. The program provided an additional $100 in supplemental benefits to eligible individuals. It’s been s extended through September 6, 2021, under the new law.
Federal Pandemic Unemployment Compensation
The FPUC program first gave $600 per week as a supplement to the benefits provided by the state. The program under the CARES Act was set to expire on July 31, 2020. It was later extended by the Consolidated Appropriations Act through March 14, 2021, but at a reduced rate of $300 in benefits per week. The ARPA now extends the $300 in supplemental benefits through September 6th of this year.
Also, the ARPA offers a waiver of federal taxes on the first $10,200 in unemployment benefits received in 2020 for those who earn less than $150,000.
More Short-Time Compensation Programs
Short-Time Compensation programs permit employers to decrease an employee’s hours rather than laying them off. Also, those employees whose hours are reduced are eligible for prorated unemployed benefits.
Under the CARES Act, states can get 100% reimbursement from the federal government for unemployment benefits paid out under Short-Time Compensation programs. Participation in these programs is an option to layoffs for employers who are facing a reduction in the amount of work available. Prior to implementing a Short-Time Compensation program, employers are required to submit a plan for approval to the appropriate state workforce agency.
The ARPA extends the 100% reimbursement to states for unemployment benefits paid under Short-Time Compensation programs until September 6, 2021.
The Employee Retention Credit
This was first introduced under the CARES Act. The Employee Retention Credit was then updated and expanded under the Consolidated Appropriations Act to help employers who were having financial issues or closing a business due to COVID-19.
The Employee Retention Credit is a payroll tax credit, which offers a refundable tax credit to eligible employers based on the amount of qualified wages they paid to certain employees.
The tax credit is supposed to encourage employers to retain employees on the payroll. Under the CARES Act, the tax credit was limited to $5,000 per employee for 2020.
The Consolidated Appropriations Act expanded the credit to those payments of qualified wages, which were made in the first half of 2021 and upped the maximum available credit to $7,000 per employee per quarter.
The ARPA extends this for two more quarters through the end of 2021. The Act also expands its applicability to certain employers. Prior to the ARPA, employers whose operations were fully or partially suspended because of government orders, or those employers who experienced a significant drop in their gross receipts because of the pandemic were eligible for a tax credit.
The Act now expands the eligibility to include the following:
- A recovery startup a business: those who started business after February 15, 2020, have gross annual receipts of up to $1 million, and are otherwise ineligible under the eligibility test); and
- Severely financially distressed employers: those with gross receipt reductions of more than 90% as compared to the same quarter in 2019.
Expanded Cobra Subsidies
Consolidated Omnibus Budget Reconciliation Act or COBRA insurance coverage lets an employee continue to stay on his or her employer’s health insurance for up to 18 months after their coverage is lost because of a reduction in work hours or the employee’s involuntary termination of employment.
Prior to the ARPA, employees and dependents of employees had to pay all of the premiums. The new law now provides individuals with up to six months of 100% subsidized COBRA coverage for those who are eligible for COBRA because of an involuntary termination from employment or a reduction in work hours.
The premium subsidy will go from April 1, 2021, through September 30, 2021. Also, sponsors of group health plans will be subject to new notice requirements, and employers will be reimbursed for the subsidy through a payroll tax credit.
If you’re a California business owner with questions about these new provisions in the American Rescue Plan Act and how they may impact your company, contact the experienced California employment law attorneys at Eanet, PC at (310) 997-4185.
Eanet, PC handles all types of employment law, business and complex commercial litigation in both state and federal court and provides extensive advice and counsel and compliance assistance to our clients.