On December 27, 2020, President Trump signed into law the long-awaited COVID-19 stimulus package (the “Bill”), which provides over $900 billion in relief to individuals and U.S. businesses. The wide-ranging Bill contains several provisions impacting large and small employers alike. Below are the key takeaways.
FFCRA Leave Voluntary Beginning January 1, 2021
The Families First Coronavirus Response Act (the “FFCRA”) required private employers with less than 500 employees and certain public employers to provide: (i) 80 hours of COVID-19 related paid sick leave to employees under the Emergency Paid Sick Leave Act (“EPSLA”); and (ii) up to 10 weeks of paid, job-protected leave under the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) for employees who worked for at least 30 days and were unable to work due to the unavailability of a child care provider and the need to care for a child whose school was closed due to COVID-19. Covered employers under the FFCRA qualified for dollar-for-dollar tax credits on amounts paid to employees taking leaves for qualifying reasons (subject to daily and aggregate payment caps). Under this framework, tax credits also extend to amounts paid or incurred to maintain health insurance coverage. The paid sick leave and tax credit benefit provisions under the FFCRA were in effect since April 1, 2020 and expired on December 31, 2020.
Although the new Bill does not extend the FFCRA’s mandated leave provisions, it provides that FFCRA leave is optional beginning January 1, 2021. Under the Bill, covered employers may voluntarily continue to provide paid leave (as would have been required under the EPSLA and EFMLEA had the FFCRA been extended) and still claim dollar-for-dollar tax credits on wages paid to employees taking such leave. The tax credit is available for leaves between January 1, 2021 and March 31, 2021.
The Bill does not require employers to provide additional leave to employees who have already exhausted their available 80-hour EPSLA leave bank. Although unclear in the text of the Bill, in the event the FMLA 12-month period resets under employers’ policies, employees appear to be entitled to paid FMLA once again. The Bill further provides that continuing tax credits are only available for leaves that would otherwise be covered by the FFCRA (i.e., employees must be eligible for leave under the FFCRA and must have an available leave bank). Next, employers not covered under prior FFCRA provisions (such as those with 500 or more employees) are not entitled to tax credits for paid leave they voluntarily provide to employees. Finally, if employers are covered by the FFCRA but are not entitled to tax credits under the prior FFCRA framework (e.g., public employers), they would not be entitled to tax credits for any voluntarily provided paid leave.
Expansion of Unemployment Assistance
The Bill also expands upon the previously enacted federal unemployment emergency programs under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which expired on December 31, 2020.
For instance, the Federal Pandemic Unemployment Compensation (“FPUC”) provided a $600 weekly payment to unemployed workers between April 5, 2020 and July 31, 2020. This benefit was in addition to the benefit amount such workers would be entitled to receive under state law. The Bill reinstates this benefit, but reduces it in half. Consequently, unemployed individuals will now be entitled to an additional $300 for each week of unemployment between December 26, 2020, and March 14, 2021.
Under the CARES Act, Pandemic Emergency Unemployment Compensation (“PEUC”) provided for thirteen (13) weeks of unemployment benefits for individuals who had exhausted unemployment benefits available under state law. The Bill extends PEUC by providing for up to twenty-four (24) weeks of additional unemployment benefits to eligible employees who have exhausted similar benefits under state law. With this extension, eligible recipients may receive up to fifty (50) weeks of benefits between state programs and PEU. These benefits are available through March 14, 2021, following which new claimants will not be eligible for further benefits (but individuals receiving benefits as of March 14, 2021, will be eligible for continued payments until April 5, 2021).
Under the CARES Act, Pandemic Unemployment Assistance (“PUA”) provided unemployment benefits to certain workers who were not eligible for unemployment benefits under state law, such as self-employed workers and independent contractors. The Bill extends PUA benefits until March 14, 2021. Following March 14, 2021, new claimants will no longer be permitted to apply for PUA benefits. However, individuals receiving PUA benefits as of March 14, 2021, will continue to receive benefits until April 5, 2021. The Bill also extended the duration of PUA benefits for eligible individuals from thirty-nine (39) weeks (under the CARES Act) to fifty (50) weeks.
Direct Payments
The Bill provides direct payments of $600 for individuals making up to $75,000 per year in adjusted gross income and $1,200 for married couples filing taxes jointly making up to $150,000 per year, as well as a $600 payment for each child dependent. Heads of household are eligible for the full $600 payment up to an income of $112,500. Thus, at the full benefit amount, an eligible family of four will receive $2,400 in direct payments.
Changes to PPP Loans
The Bill also includes significant changes to the existing Paycheck Protection Program (PPP) loans available to businesses. Specifically, the Bill expands PPP eligibility as well as the ways in which businesses may use PPP loan funds; provides for a second wave of PPP loans in specific circumstances; and sets new requirements with respect to increasing loan amounts as well as loan forgiveness.
California Law and Local Ordinances
California’s supplemental paid sick leave law (AB 1867) provided immediate access to up to 80 hours of COVID-19 paid sick leave for employees working for private businesses with 500 or more employees nationally. California’s supplemental paid sick leave law also applied to public and private employers of first responders and health care employees who opted not to provide leave under federal law. Benefits under California’s AB 1867 were effective until December 31, 2020, or the expiration of any federal extension of the FFCRA, whichever occurred later. As of today, the California legislature has not adopted any laws requiring employers to provide COVID-19 leave in 2021. Therefore, as of December 31, 2020, both the FFCRA and AB 1867 leave requirements expired. Although employers covered under previous FFCRA and California supplemental sick leave provisions are no longer required to provide COVID-19 related paid sick leave beginning January 1, 2021, they may be subject to additional local ordinances extending supplemental sick leave benefits into 2021[1].
Action Items for Employers
- Assess whether your business will continue to provide paid sick leave and paid family leave to employees until March 31, 2021. Recognize that it is best to provide these leaves consistently to all employees to avoid workplace bias claims.
- Revise and update existing written paid leave policies and/or leave forms to remove references to mandatory leave under the FFCRA. Notify employees of changes to paid supplemental sick leave policies, including changes in their existing leave entitlements.
- Assess supplemental COVID-19 paid sick leave obligations under local ordinances and state law.
- Work with experienced counsel to identify PPP related changes that directly impact your business.
[1] The City and County of San Francisco’s supplemental paid sick leave was extended to February 2021. San Mateo County recently extended the supplemental paid sick leave ordinance that applies to the unincorporated areas of the county to June 30, 2021. Likewise, Sacramento extended the supplemental paid sick leave that applies to the unincorporated areas of the county to March 31, 2021. The City of San Jose recently extended its supplemental paid sick leave ordinance until June 30, 2021.
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