The American Rescue Plan: What Employers Need to Know
On Thursday, March 11, 2021, President Biden signed a $1.9 trillion coronavirus relief plan, the American Rescue Plan Act of 2021 (“ARP” or “the Act”). The relief package is intended to provide continued economic relief to individuals, businesses, and state and local governments during the COVID-19 pandemic. The following is a summary of the key employment provisions in the Rescue Plan:
FFCRA Tax Credit Extension: The Families First Coronavirus Response Act (“FFCRA”) created the Emergency Paid sick Leave Act (“EPSLA”) and Emergency Family Medical Leave Expansion Act (“EFMLEA”) under which employers with fewer than 500 employees, and most public sector employers, had to provide paid sick leave to employees who needed leave for Coronavirus-related reasons. The FFCRA required covered employers to provide EPSLA and EFMLEA leave through December 31, 2020 but provided a tax credit related to the cost of leave to private employers. Private employers who continued to voluntarily provide the paid leave as of January 1, 2021 continued to be provided tax credits for such leave until March 31, 2021. The ARP has now extended the period of tax credits for voluntary participation with FFCRA to September 30, 2021.
Unemployment Benefits: ARP extends the Federal Pandemic Unemployment Compensation benefit through September 6, 2021, while keeping the benefit at the current amount of $300 per week. The first $10,200 in unemployment benefits are tax-free for 2020 for those households making less than $150,000 per year. ARP also extends the CARES ACT provisions that provided a 75% subsidy for costs incurred by employers who provide unemployment benefits on a reimbursable basis rather than via tax contributions. The Act appropriates $2 billion to the Department of Labor to support timely access to benefits.
COBRA Premium Subsidy: Prior to ARP’s enactment, those who elect COBRA coverage are required to pay the full cost of their coverage, including the employer contribution. Now, there is a one hundred percent subsidy for individuals who lose their job and choose to use COBRA to continue their existing employer-sponsored health coverage through September 30, 2021. The requirement does not apply to individuals who voluntarily resign from employment, however.
Single-Employer Pension Plan Relief: ARP provides a longer period for amortizing funding shortfalls, effective for plan years beginning after December 31, 2019, from seven years to 15 years. ARP also provides for an extension of funding stabilization measures for single employer plans, also effective for plan years beginning after December 31, 2019.
Multiemployer Pension Plan Relief: ARP provides delays in applying charges to funding plans or schedules, and delays designation as a plan in critical or endangered status in 2020 or 2021. ARP provides a longer investment loss amortization period for multiemployer plans, effective for plan years ending on or after February 29, 2020.
Increase to Dependent Care Flexible Spending Account Maximum Limit: ARP increases the maximum amount that may be excluded from an employee’s gross income under a Section 129 dependent care assistance program from $5,000 ($2,500 married filing separately) to $10,500 ($5,250 married filing separately). While this provision is voluntary, retroactive amendments are permitted if an amendment is adopted by the last day of the 2021 plan year and the plan is administered consistently with the terms of the amendment beginning on its effective date. A new population of taxpayers may be eligible for this credit in 2021 as the increase in the phaseout level from $15,000 to $125,000 will entitle those earning up to $125,000 to the entire credit.
Funding for COVID-19 Related Worker Protection Activities: ARP appropriates $150 million to various DOL agencies, including the Wage and Hour Division and OSHA, to “carry out COVID-19-related worker protection activities” through September 2023. $75 million of this appropriation is specifically allocated to OSHA, though the number of audits and inspections is likely to increase.
Extension of Federal Unemployment Supplements: ARP includes an extension of the enhanced $300 weekly unemployment relief, first made available in the early pandemic relief bills. The extension, originally set to expire in March, will run through September 6, 2021 under the bill, but with some changes. Most notably, the first $10,200 of unemployment benefits being tax-free for households with up to $150,000 of income. ARP does not provide a different threshold for single and joint filers and both spouses are entitled to consider $10,200 of their unemployment compensation nontaxable, for a total of $20,400 if both spouses receive such benefits.
Paycheck Protection Program (“PPP”): The Act provides $7.25 billion in additional funding for the PPP for small businesses. It does not extend the current PPP application period, which is scheduled to close on March 31, 2021.
Expansion of PPP to Additional Nonprofits: Under the Act, more nonprofits are allowed to apply, provided the nonprofit does not employ more than 300 employees, the cost of its lobbying activities does not exceed $1 million during the most recent tax year, its lobbying activities may not comprise more than 15% of total activities, and it does not receive more than 15% of its receipts from lobbying activities. In addition, the Act makes some larger nonprofits eligible for PPP funding, including 510(c)(3) organizations and veterans’ organizations that employ not more than 500 employees per physical location, and 501(c)(6) organizations, domestic marketing organizations, and additional covered nonprofit entities that employ not more than 300 employees per physical location.
Employee Retention Tax Credit: A highly popular provision of the original COVID-19 relief legislation is the payroll credit for employee retention. ARP extended the credit through the end of 2021. It also expands eligibility for the credit to new startups that were established after February 15, 2020 and companies if their revenue declined by 90% compared to the same calendar quarter of the previous year. The employee retention credit is capped at $50,000 per calendar quarter for startups.
No Minimum Wage Increase: Though the House initially proposed a gradual increase of federal minimum wage from the current hourly rate of $7.25 to $15 by 2025, the measure fell short in the Senate and was not included in the final version signed into law by President Biden.
President Biden Orders Review of Title IX
On March 8, 2020, President Biden signed an executive order directing Secretary of Education Miguel Cardona to begin review of the Trump administration’s Title IX regulations (“2020 Regulations”). The Executive Order on Guaranteeing an Educational Environment Free from Discrimination on the Basis of Sex, Including Sexual Orientation or Gender Identity establishes a policy that all students be guaranteed an education free from discrimination on the basis of sex, sexual orientation, and gender identity, including discrimination in the form of sexual harassment and sexual violence.
The order instructs Secretary Cardona to “consider suspending, revising, or rescinding” any agency actions, including the regulations, that may be inconsistent with the policy set forth in the order and to “issue new guidance as needed.” However, because the former Secretary of Education Betsy DeVos 2020 Regulations were passed using statutory rulemaking processes, rescinding them would likely result in legal challenges. If the new administration seeks to rescind the 2020 Regulations and impose new rules at the end of this review period, it must undergo the same rulemaking process as the previous administration, a process that took DeVos three years to complete.
President Biden’s order acknowledges “the significant rates at which students who identify as lesbian, gay, bisexual, transgender, and queer (LGBTQ+) are subject to sexual harassment, which encompasses sexual violence.” The order directs Secretary Cardona to consider taking additional actions to account for “intersecting forms of prohibited discrimination,” to ensure that educational institutions are providing sufficient and appropriate support for students who experience sex discrimination, and to ensure that school procedures are fair and equitable for all.
Colleges and universities should anticipate new title IX guidance that changes the way they are expected to handle allegations of sexual misconduct and sex discrimination. Schools should also be aware the United States’ current policy is that discrimination against students based on gender identity or sexual orientation constitutes sexual discrimination in violation of Title IX.
Executive Order on Establishment of the White House Gender Policy Council
The Executive Order on Establishment of the White House Gender Policy Council, which President Biden signed on March 8, 2021, establishes a Gender Policy Council. The Council is tasked with, among other items, implementing policies and programs to combat systemic bias and discrimination, including sexual harassment, and to address structural barriers to women’s participation in the workforce, wage and wealth gaps, and caregiver needs of American families. Moreover, in recognition that the COVID-19 pandemic has disproportionately affected women and girls, the Council is to draft recommendations to specifically address such effects, and is to especially consider the experience and needs of women and girls in underserved communities.
President Biden will designate two co-chairs to lead the council, which will also include other cabinet secretaries. The order establishing the council also creates two council staff positions: Special Assistant to the President and Senior Advisor on Gender-Based Violence. The Council is to develop and submit a strategy to address the above concerns within 200 days of President Biden signing the order. Each year thereafter, the Council will submit an annual report advising the President on the progress achieved in implementing the strategy. A version of this annual report will be published for the public.
PRO Act: House Passes “Protect the Right to Organize Act”
On March 9, 2021, the U.S. House of Representatives passed the Protecting the Right to Organize Act, Known as the PRO Act, with a largely party line vote of 225-206. The PRO Act was originally passed by the House of Representatives in February 2020, but the then Republican-controlled Senate failed to take any action. Under President Biden’s administration, however, the PRO Act is front and center once again. President Biden has already voiced strong support for the bill and released a statement urging Congress to send the PRO Act to his desk. This does not mean that there is a clear path for the PRO Act in the 50/50 split Senate, as filibuster rules require 60 votes to end debate on a bill and bring it to a vote.
The bill’s passage would be a big victory for labor unions, as it includes sweeping changes to federal labor laws that would significantly impact employers and empower unions. The PRO Act, if passed, would be the most dramatic reform of federal labor laws since National Labor Relations Act (“NLRA”) of 1935.
If enacted, the PRO Act would affect a range of labor law issues, including:
- Employee vs. Independent Contractor: Alter the standards under the NLRA for determining whether an independent contractor is an employee by adopting the “ABC test,” which could pave the way for more contractors to organize unions.
- No Retaliation: Bar employers from retaliating against unionization efforts, protect workers’ right to strike, and override state “right to work” laws.
- Joint-Employer Test: Codify the joint-employer standard established by the NLRB decision Browning-Ferris Industries, which provides that an employer’s status as a joint employer rests on its reserved right to control employees, either directly or indirectly.
- Union Elections: Permit employees to hold union elections off company grounds and use mail or electronic ballots for voting.
- Use of Employer’s Electronic Systems: Grants employees the right to utilize an employer’s electronic systems (such as e-mail, computers, cell phones, and other company equipment) to organize and engage in protected concerted activity.
- Card Checks: Where a union loses an election, it could nevertheless be certified based on signed authorization cards where there is alleged employer interference in the election.
- Expand Penalties: Grant the NLRB the power to levy fines against companies that engage in unfair labor practices.
- Joint, Class, and Collective Actions: Prohibit agreements requiring employees to waive the right to pursue joint, class, or collective actions in court.
- Captive-Audience Meetings: Ban companies from holding “captive-audience” meetings for the purpose of dissuading employees from joining unions.
- Definition of “Supervisor”: Redefined the definition to make it narrower and include more frontline leaders as “employees” covered by the NLRA.
- Mediation: Required in initial contract negotiations if agreement is not reached within 90 days.
- Secondary Boycotts: Permits workers to engage in secondary boycotts and prevents employers from permanently replacing strikers.
- Persuader Rule: Codifies the Obama-era “persuader rule,” whereby employers must report payments.
The legislation will now move to the Senate where if faces a tough vote. We will report any developments as the occur.