State Resources for Your Business

A series of co-mingled laws dating back to the earliest days of the COVID-19 pandemic in March 2020 provided billions of dollars in aid that included funding to help finance the requirement for certain employers to offer emergency paid sick and emergency family and medical leave — and later credit for qualified employers who voluntarily offered this coverage.

The end of the National Public Health Emergency resulted in the end of these requirements for certain employers to offer the emergency leaves. What remains now for businesses still trying to recover from the negative financial impact of the pandemic is the potential to claim payroll tax credits if they were eligible but did not claim these credits previously or if they need to adjust the amounts they claimed.

Note: These tax credits need to be reconciled with other tax credits and government funding to ensure that no double-dipping takes place, which includes any tax credits/amounts already claimed and received for Paycheck Protection promise (PPP) loan forgiveness and the employee retention tax credit.

It’s important to understand the framework of leave and associated credit for any employer who needs to amend any prior quarter’s Form 941 in 2020 and 2021 to claim or adjust the credit, so it is done accurately. This requires the use of Form 941-x.

Tax Credits Under Family First Coronavirus Response Act

The Families First Coronavirus Response Act (FFCRA) originally offered payroll tax credits to American private employers with fewer than 500 employees to offset the costs of the requirement to provide employees with qualifying paid leave for specified reasons related to COVID-19. When that mandate sunset at the end of 2020, the American Rescue Plan Act (ARPA) extended and expanded the payroll tax credits, allowing covered employers to take the credits until Sept. 30, 2021, if they voluntarily provided employee paid leave under the FFCRA framework.

However, the credit could be impacted by state and local COVID-19 leave requirements and the interaction with the requirements under FFCRA. Plus, an employer could only qualify for the federal tax credit if the leave met the requirement of the original FFCRA mandate.

It should be noted that the credit cannot be claimed by private employers with 500-plus employers even if they offered comparable leave.

The following highlights the changes under ARPA and delineates by date because if you plan to claim the credit on payroll taxes paid through March 31, 2021, or after April 1, 2021, there are different requirements.

What is the Purpose of the Tax Credits?

Employers who provided employees with qualified paid leave related to COVID-19 that fell under the Emergency Paid Sick Leave Act (EPSLA) and/or the Emergency Family and Medical Leave Expansion Act (EFMLEA) can receive tax credits to reimburse 100 percent of leave wages paid.

April 1, 2020 through March 31, 2021

Generally, American private employers with fewer than 500 employees were eligible to claim the credits. Self-employed individuals could have claimed the family leave credit for up to 50 days.

April 1, 2021 through Sept. 30, 2021

In addition to private employers, healthcare providers and certain governmental and state/local employers became eligible to claim the credit under the same requirements. The limit on the family leave credit for self-employed individuals increased to 60 days.

Under ARPA, new non-discrimination rules also were established that apply to the credit for either leave, disallowing a credit for any employer who discriminates in favor of highly compensated employees, full-time employees or employees based on employment tenure.

Calculation of Maximum Hours

April 1, 2020 through March 31, 2021

• Full-time employees were entitled to 80 hours of leave under the EPSLA if they were normally scheduled to work at least 40 hours each workweek.
• Part-time employees who worked less than 40 hours per week were entitled to EPSL in the amount up to the number of hours that an employee works, on average, over a two-week period.

The U.S. DOL included additional guidance in its Temporary Final Rule for the calculation of maximum EPSL if a traditional weekly schedule does not exist or if a schedule varies.

Under the EFMLEA, calculate hours of leave based on the number of hours the employee is normally scheduled to work. If the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours.

April 1, 2021 through Sept. 30, 2021

The maximum number of days for which qualified sick leave wages could be paid and the number allowed for an employer to get a credit would be reset to 10 days. Hours were calculated as noted above. However, employees couldn’t carry over unused hours. If an employer chose to provide leave under the EPSLA or EFMLEA, they would be eligible to claim the credit again.

What Are the Qualifying Reasons for Taking Leave?

April 1, 2020 through March 31, 2021

An employee qualified for EPSL if they were unable to work (including unable to telework) related to COVID-19 because the employee:

1. Was subject to a federal, state, or local quarantine or isolation order
2. Had been advised by a healthcare provider to self-quarantine
3. Was experiencing COVID-19 symptoms and is seeking a medical diagnosis
4. Was caring for an individual subject to an order (described in 1) or self-quarantine (described in 2)
5. Was caring for his or her child whose school or place of care is closed (or childcare provider is unavailable)
6. Was experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services

Part-time employees would generally have been eligible for Emergency Paid Sick Leave in an amount equivalent to their regularly schedule hours for a two-week period.

Under the EFMLEA, an employee would have only qualified for leave under No. 5 above.

April 1, 2021 through Sept. 30, 2021

The American Rescue Plan Act changed leave under the EFMLEA. Employees qualified for all six reasons to take leave that was available under the EPSLA, plus both leaves gained additional reasons under No. 3 (above), as follows:

• Employers could have claimed the credit for sick leave wages paid for employees taking leave while they awaited the results of a diagnostic test for COVID-19 after being exposed to the virus or because their employer requested the test.
• Leave taken for the employee to obtain a COVID-19 vaccine or to recover from any health issues resulting from the vaccine.

What Are the Wage Calculations for Paid Sick Leave?

Employees were to be paid based on:

• For reasons Nos. 1 to 3 above, the higher of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $511 per day
• For reasons Nos. 4 to 6 above, the higher of 2/3rds of the employee's regular rate of pay, or the applicable state or federal minimum wage, up to $200 per day

What Should Businesses Know About the EPSLA?

The American Rescue Plan Act of 2021 changed some of the provisions of the FFCRA, including the reallocation of which portion of the credit is non-refundable. The amount of the credit stayed the same.

April 1, 2020 through March 31, 2021

• If the credit exceeded the employer’s total liability of the portion of Social Security in any calendar quarter, the excess was refundable to the employer.

April 1, 2021 through Sept. 30, 2021

• If the credit exceeded the employer’s total liability of the portion of Medicare in any calendar quarter, the excess is refundable to the employer.

Additional changes included:

• The credit increased by the cost of the employer’s qualified health plan expenses and by the certain employer’s collectively bargained contributions to a defined benefit pension plan and certain amounts of collectively bargained apprenticeship program contributions.

Paid sick time provided under this Act was not preempted by other federal, state, or local laws. The IRS created FAQs that provide an overview of the tax credits.

What Should Businesses Know About the EFMLEA?

Under the EFMLEA:

Through March 31, 2021

An eligible employee qualifies for leave for caring for his or her child whose school or place of care is closed (or childcare provider is unavailable) would be paid by their employer after the first 10 days of leave at a rate of not less than two-thirds of their current rate of pay for the number of hours the employee would otherwise be scheduled to work, up to a maximum of $200 per day or an aggregate of $10,000, for up to 12 weeks in a 12-month period.

April 1, 2021 through Sept. 30, 2021

Other changes under ARPA are an increase in the maximum aggregate amount to $12,000 for up to 12 weeks in a 12-month period and the expansion of eligibility to include employers of healthcare workers and emergency responders

Recordkeeping

Employers must retain documents and information regarding leave for a period of four years, regardless of whether the decision was made to grant or deny the request for leave.

For tax credit purposes, the U.S. DOL requires employers to maintain the following for four years:

• Documentation to show how the employer determined how much paid leave the employee was eligible for (e.g., records of work performed, telework, and paid leave credits)
• Documentation to show how the employer determined the amount of qualified health plan expenses that were allocated to wages.
• Copies of any completed IRS Forms 7200 and 941 that the employer submitted to the IRS (or provided to a third-party payer to meet an employer’s employment tax obligations).

How Paychex Can Help

The passage of multiple laws created complexities for businesses owners who want to take advantage of the paid leave tax credits. However, employers must review their obligations under existing state and local COVID-19 leave laws, as well as any other federal, state or local laws related to an employee’s right to leave.

This is a good time to re-evaluate your HR needs. Consider how our HR Services, tax services and payroll solutions could save you time by helping alleviate extra work and the potential risk of non-compliance.

After legislation in 2021 delayed the implementation of Oregon’s paid family and medical leave program – Paid Leave Oregon – the state has established that employers must begin making contributions Jan. 1, 2023, with eligible employees are allowed to apply for benefits starting Sept. 3, 2023.

However, due to potential shortfalls in the program to full fund anticipated benefits, the governor signed legislation (OR S 31) in May 2023 that would allow the Employment Department to delay, if necessary, paid leave benefits until Dec. 3, 2023 and continue to delay every three months until the program becomes solvent. If necessary, the department would have to announce the first delay by Aug. 11, 2023. 

When House Bill 2005 was originally signed in August 2019, Oregon became the eighth state to establish a paid family and medical leave program for eligible employees. However, unlike programs in California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island, and Washington, Oregon will be the first in the country to offer 100 percent wage replacement for low-wage workers.

Paid Leave Oregon is designed to provide partially or fully compensated time away from work to covered individuals while they are on qualified family leave, medical leave, or safe leave. For those who meet the criteria, Oregon provides up to 12 weeks of paid leave.

Which Employers Will Be Required to Comply with Paid Leave Oregon Provisions?

As defined in the Oregon paid family and medical leave law, there is no minimum employee threshold that determines which employers are required to follow the requirements of Paid Leave Oregon. The law will apply to public and private employers with one or more employees. The law does not apply to the federal government or tribal governments. Self-employed individuals and employees of a tribal government may opt in for coverage under the law.

What is the Oregon PFML Insurance Fund?

The Oregon PFML Insurance Fund is a trust fund established by law and is separate and distinct from the Oregon General Fund. The fund will consist of all monies deposited into the fund from employer and employee contributions, penalties from fees, and all other monies deposited into the fund.   

Beginning Jan. 1, 2023, contributions will be paid by employers and employees. The contribution rate is determined by the Director of the Employment Department before the beginning of each year.

• The total rate may not exceed 1 percent of an employee’s gross wages.
• Employer contributions shall be 40 percent.
• Employees shall contribute 60 percent.

There are two exceptions to the percentage of contributions. First, employers that employ fewer than 25 employees are not required to pay the employer contributions. They will be required to collect and remit the employee premium. However, if an employer that employs fewer than 25 employees elects to pay the employer contributions, the employer may apply to receive a grant set forth in the Oregon PFML.

Second, an employer may elect to pay the required employee contributions, in whole or in part, as an employer-offered benefit.

The law does identify that employers will be responsible for filing a combined quarterly report of wages earned and contributions paid under this section on a form prescribed by the Department of Revenue. The report shall be accompanied by payment of any contributions due.

When Do Paid Leave Oregon Employee Benefits Take Effect?

While the law requires contributions be paid beginning Jan. 1, 2023, employees are not eligible to apply for benefits until Sept. 3, 2023.

What is an “Eligible Employee” Under Paid Leave Oregon?

Under Paid Leave Oregon, an eligible employee is one who has:

• Earned at least $1,000 in wages during the base year (defined as the first four of the past five completed calendar quarters proceeding the benefit year), or
• An employee who has earned at least $1,000 in wages during the alternate base year (defined as the last four completed calendar quarters proceeding the benefit year).

The law defines an employee as an individual performing services for an employer for pay or under any contract of hire, written or oral, express or implied. The law does not apply to independent contractors, participants in a work-study program in a secondary or post-secondary educational institution, a railroad worker exempted under the U.S. Railroad Unemployment Insurance Act, or volunteers.

What Are Reasons for Qualified Leave Under Paid Leave Oregon?

Eligible leave will include time away from work that can be used for the following reasons, individually or in any combination:

• To care for and bond with a child through birth, adoption, or foster placement within the first 12 months
• To care for a family member with a serious illness or injury (see below for definition of “family member”)
• To care for an employee’s own serious illness or injury
• Safe leave to seek medical, legal, or law enforcement assistance to address an incidence of domestic violence, harassment, sexual assault, or stalking 

The law makes clear that Paid Leave Oregon will not include leave for active military service or impending active duty in the Armed Forces or the death of a family member, although leave under other state and federal programs might be available for those reasons.

Who is Considered a “Family Member” Under Paid Leave Oregon?

Oregon’s definition of “family member” includes a spouse, a parent, a sibling or stepsibling, grandparent, grandchild, domestic partner, and an individual related by blood or who lives with or is connected to the eligible employee like a family member.

The Oregon state website also provides definitions of “parent” and “child”.

How Long May an Employee Be Away from Work Under Paid Leave Oregon?

A covered individual may qualify for up to 12 weeks of family and medical leave insurance benefits per benefit year for leave taken for any of the following purposes, in any combination:

• Family leave
• Medical leave
• Safe leave

A covered individual who has taken any amount of paid leave available through Paid Leave Oregon may take up to 12 weeks of leave in the benefit year. If the covered individual is pregnant, has given birth, or has health issues related to childbirth, they may be able to take up to two more weeks for a total of 14 weeks.

Any family leave or medical leave taken under Paid Leave Oregon that also qualifies for unpaid leave under the Oregon Family Leave Act or under the federal FMLA must be taken concurrently. Individuals might be eligible for additional unpaid time off under these leaves.

Paid family and medical leave benefits are in addition to any paid leave time under the Oregon Paid Sick Leave law or paid leave provided by the employer (e.g., vacation leave or other paid leave earned by an employee).   

What are the Benefits Available to an Employee Under Paid Leave Oregon?

The benefits available to an employee are dependent on the employee’s average weekly wage.

If the eligible employee’s average weekly wage is equal to or less than 65 percent of the state’s average weekly wage, the employee’s weekly benefit amount shall be 100 percent of the employee’s average weekly wage.

If the eligible employee’s average weekly wage is greater than 65 percent of the state’s average weekly wage, the employee’s weekly benefit amount is the sum of:

• 65 percent of the average weekly wage; and
• 50 percent of the employee’s average weekly wage that is greater than 65 percent of the average weekly wage

There will be a maximum benefit amount equivalent to 120 percent of the state’s average weekly wage and a minimum benefit amount equivalent to 5 percent of the state’s average weekly wage. Benefits are payable only to the extent that monies are available in the PFML Insurance Fund.

What If an Employer in Oregon Offers Its Own Paid Leave Program?

An employer who elects to offer an equivalent plan can seek exemption from Paid Leave Oregon contributions. To be approved, the employer must show the following:

• The plan is made available to all employees who have been continuously employed with an employer for 30 days.
• The benefits afforded to employees covered under the equivalent plan are equal to or greater than the weekly benefits and the duration of leave that an eligible employee would qualify under the Oregon PFML.

Employers must apply to opt-out and pay an application fee. The application fee is $250. If the exemption is approved, neither an employer that provides benefits under an approved equivalent plan nor an employee covered under such a plan is required to make the Oregon PFML contributions.

What Notice is an Employee Required to Provide?

An employer may require an eligible employee to give the employer written notice – including an explanation for the reason the leave is requested – at least 30 days before starting a period of family leave, medical leave, or safe leave.

If the leave is not foreseeable (e.g., an unexpected serious health condition, premature birth of a child, unexpected adoption), the employee will be required to give oral notice to the employer within 24 hours of the commencement of the leave and must provide written notice within three (3) days after commencement of the leave. An eligible employee who takes safe leave shall give the employer reasonable advanced notice of the individual’s intention to take safe leave, unless giving the advance notice is not feasible.

If an employee fails to provide proper notice, the state may reduce the first weekly benefit amount payable to the employee by up to 25 percent.

Does Paid Leave Oregon Include Employment Protection and an Anti-Retaliation Provision?

Yes. After returning to work from paid family and medical leave, an eligible employee is entitled to be restored to the position of employment held by the employee when the leave commenced, if that position still exists, without regard to whether the employer filled the position with a replacement worker during the period of leave. If the position held by the employee at the time leave commenced no longer exists, the employee is entitled to be restored to any available equivalent position with equivalent employment benefits, pay and other terms and conditions of employment.

For employers who employ fewer than 25 employees, if the position held by an eligible employee when the employee’s leave commenced no longer exists, an employer may, at the employer’s discretion based on business necessity, restore the eligible employee to a different position with similar job duties and with the same employment benefits and pay.

During a period in which an eligible employee takes paid family and medical leave, the employer must maintain any health care benefits the employee had prior to taking such leave for the duration of the leave, as if the employee had continued in employment continuously during the period of leave.

The law makes it an unlawful employment practice to deny leave or interfere with any right to which an eligible employee is entitled to under Paid Leave Oregon.

The law clarifies that temporary workers who were hired to replace an eligible employee taking PFML do not have rights to be retained by the employer. The employer may terminate or reassign the temporary worker. However, the employer must at the time of hire or reassignment due to paid family and medical leave, inform the temporary worker of their status as a temporary worker due to such leave.

Additional resources

Employee FAQs on Paid Leave Oregon website

Employer FAQs on Paid Leave Oregon website

The COVID-19 national emergency officially ended April 10, 2023, when President Biden signed a bi-partisan congressional resolution, a month earlier than the original scheduled end. However, previous issued guidance stated the end of the outbreak period as July 10, 2023, and recent informal guidance corroborated that.

The national emergency had granted the federal government and its agencies special permissions regarding regulations pertaining to the pandemic since 2020 that impacted employers and employees. With the end of the national emergency, one of the main impacts will occur with COBRA extensions.

The following is a high-level overview:

How Will COBRA Be Impacted by End of National Emergency?

Election Periods

All extensions granted during the pandemic will end at 11:59 p.m. July 10, 2023, which includes COBRA, Claims and Appeals, HIPAA special enrollment events, and Plan Notice.

Generally, if a participant has COBRA coverage as of May 11, 2023, then starting July 11, 2023, pre-pandemic COBRA time periods will return based on federal COBRA compliance guidelines. In the event of an initial qualifying event, an eligible qualified beneficiary will now have:

• a 60-day election period, removing the “until the earlier of (a) one-year from the date they were first eligible for extensions or (b) 60 days after the announced end of COVID-19 national emergency that had been in place. In no case will an extension period exceed one (1) year.

According to the U.S. Department of Labor extension guidelines, if participants are coming off an extension that ends at 11:59 p.m. July 10, 2023, the remaining election period or premium grace period will be applied on July 11, 2023.

Eligible participants who are eligible for COBRA on May 12, 2023 through July 10, 2023, will be subject to a 60-day election period on July 11, 2023.

Payment Periods

COBRA payment periods also were impacted by the extensions granted by the agencies that enforce COBRA requirements, including the IRS, Treasury, and the U.S. Department of Labor. These extensions also end July 10, 2023, and payment periods will revert to what they were pre-pandemic:

• A participant has 45 days to remit their initial payment. 
• A participant then must remit a premium payment every 30 days to continue coverage.

What Employers Should Know

With the conclusion of the COVID-19 national emergency, starting July 11, 2023, employers also must adhere to the pre-pandemic election notice deadlines.

• 14 days to send notice to qualified beneficiaries following a qualifying event, or
• 44 days to send notice for employers who are plan administrators

Employers also could consider communicating with individuals to inform them of these upcoming changes, including COBRA election, the end of HIPAA special enrollment, and payment deadlines, plus letting participants know that not all payments are due right away.

For more information, you can review the Department of Labor’s Frequently Asked Questions (FAQs).