New ARPA/COBRA Subsidy
The federal American Rescue Plan Act of 2021 (ARPA) provides for a 100% subsidy of COBRA premiums for six months from April 1, 2021 through September 30, 2021, for individuals (and their covered dependents) who lose coverage under their employer’s health care plan due to a reduction in hours or involuntarily termination for reasons other than gross misconduct.
The subsidy applies to plans subject to COBRA (both insured and self-insured plans) as well as self-funded and insured plans not subject to COBRA but subject to continuation coverage under state law (such as California’s Cal-COBRA, which applies to employers with two or more employees). It does not apply to flexible health spending accounts, and it is currently unclear whether it applies to dental or vision plans.
Subject employers are required to cover the COBRA premiums, and will be reimbursed through a federal tax credit toward their quarterly payroll taxes.
Assistance Eligible Individuals
Individuals eligible for the subsidy, known as “Assistance Eligible Individuals” (AEIs), are those who were involuntarily terminated or experienced a reduction in hours, and who timely elect COBRA continuation coverage after April 1, or, in the case of individuals who failed to timely elect COBRA continuation coverage or who dropped the coverage prior to April 1, make a special election within a new 60-day special election period beginning April 1 and ending 60 days after they have been notified of their eligibility.
The subsidy does not apply to individuals who have voluntarily resigned. However, the statute does not specify whether a particular termination of employment (such as a contract-based resignation for “good reason,” mutual termination, voluntary exit incentive program or mandatory retirement) is voluntary or involuntary, nor does it distinguish between voluntary or involuntary reduction in hours. The Department of Labor may provide additional guidance on these points.
Individuals are no longer eligible for the subsidy once they become eligible for other employer coverage or Medicare, or beyond their maximum COBRA coverage period (which, under federal law is 18 months and under California law may be up to 36 months). Individuals must notify their plan if they become so eligible or be subject to statutory penalties.
ARPA imposes the following notice requirements:
- New AEIs. By May 31, 2021, employers or plan administrators must notify AEIs who have become eligible for the subsidy of the subsidy’s availability and, if permitted by the plan, the option to enroll in different coverage. An employer or plan administrator can provide this information in the COBRA election notice or a separate notice to be distributed with the election packet.
- Special Election AEIs. By May 31, 2021, employers or plan administrators must notify AEIs who are eligible for the special election of the opportunity to elect continuation coverage. Once notified, the 60-day election period begins.
- The following specific information must be included in the notices to AEIs. The DOL is expected to provide model language for these notices by April 10, 2021.
- A general notice regarding the availability of the subsidy.
- A general notice regarding the option to enroll in different coverage if the employer permits it.
- A prominently displayed description of the AEI’s right to the subsidy and conditions on entitlement.
- A description of the AEI’s right to enroll in different coverage if so permitted.
- The forms necessary to establish eligibility.
- A description of the special election period.
- A description of the qualified beneficiary’s obligation to notify the plan of ineligibility and penalties for failure to so.
- Contact information of the plan administrator and any other person maintaining relevant information in connection with the subsidy.
- Subsidy Termination. Employers must also notify AEIs when the COBRA subsidy is set to expire no more than 45 days and no fewer than 14 days before expiration. The DOL is expected to provide model language for this notice by April 25, 2021.
Employers should coordinate with their health plans and administrators to identify previously terminated employees that may be eligible for the subsidy and ensure that compliant notices are provided prior to the May deadlines.
Employers should also coordinate with their legal counsel to review and update their termination documents to include information regarding the subsidy and special election period. Employers who offer COBRA continuation coverage as part of a severance agreement may want to only provide the mandatory six months of coverage for which they will be reimbursed, or may choose to provide paid COBRA continuation coverage in addition to the subsidized coverage. Importantly, if an employer relies on payment of COBRA benefits as consideration for a release of claims, such consideration may no longer be valid if the employer is being reimbursed. Such employers should therefore ensure that they make payment beyond the six-month subsidy, or provide separate consideration (such as a severance payment) in exchange for the release.
Lastly, employers should coordinate with their finance and accounting personnel to ensure that they take the appropriate steps to claim their quarterly tax credit.
California Enacts 2021 COVID-19 Supplemental Paid Sick Leave Law
California Governor Gavin Newsom recently signed into law SB 95, which extends COVID-19 supplemental paid sick leave benefits in 2021 for covered employees. Notably, this leave entitlement is in addition to the emergency sick leave provided under California’s 2020 supplemental paid sick leave law (AB 1867) and the federal Families First Coronavirus Response Act (FFCRA), both of which expired on December 31, 2020. This law is also more sweeping than California’s 2020 emergency sick leave measure and applies to employers with more than 25 employees.
- Effective period. The requirement to provide supplemental sick leave begins on March 29, 2021 and lasts through September 30, 2021. However, this requirement is retroactive to January 1, 2021. Thus, covered employees who took qualifying leave between January 1, 2021 and March 28, 2021 may request payment for that leave if it was not already paid by the employer in the amount due under the new law.
- Amount of paid sick leave. Under the new law, full-time employees are entitled to up to 80 hours of paid sick leave. Part-time employees with a regular weekly schedule are entitled to the number of hours the employee is normally scheduled to work more than two weeks. Part-time employees with variable schedules are entitled to 14 times the average number of hours worked per day during the past 6 months.
- Covered employers. The new law applies to all public and private employers with more than 25 employees, including those with collective bargaining agreements. This is far more expansive than California’s 2020 emergency paid sick leave law, which applied to private employers with 500 or more employees nationwide.
- Covered employees and leave reasons. This law covers employees who cannot work or telework for any of the following reasons:
- Caring for oneself. The employee is subject to a quarantine or isolation period by a federal, state or local order or guideline due to COVID-19, or has been advised by a healthcare provider to quarantine due to COVID-19, or is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- Caring for a family member. The employee is caring for a family member who is either subject to quarantine or isolation related to COVID-19, or has been advised by a healthcare provider to quarantine due to COVID-19, or the employee is caring for a child whose school or place of care is closed or unavailable due to COVID-19 on the premises.
- Vaccine-related reasons. The employee is attending a vaccine appointment or cannot work or telework due to vaccine-related symptoms.
- Pay during leave. Covered employees can receive pay up to a cap of $511 per day and $5,110 in total, unless federal legislation is enacted that increases these cap amounts beyond those permitted under the FFCRA.
- Notice requirements. Employers are required to display this 2021 COVID-19 Supplemental Paid Sick Leave poster developed by the California Department of Industrial Relations, in a conspicuous place, to notify covered employees about their leave entitlement. If covered employees do not “frequent a workplace,” an employer may satisfy this notice requirement by distributing the poster electronically (for example, by email).
New York State Issues New Guidance on Employee COVID-19 Leave
The New York State Department of Labor has issued new guidance on the state’s unique COVID-19 sick leave law (the “Law”), originally enacted in March 2020 and summarized in a prior client alert on emergency employee protections. The guidance confirms that eligible employees could potentially utilize up to six weeks of leave under the Law.
The key provisions of the guidance are as follows:
- If an employee returns to work after a period of mandatory quarantine or isolation and subsequently tests positive for COVID-19, the employee will be subject to an additional period of mandatory quarantine or isolation and entitled to sick leave as required by the Law, regardless of whether the employee has received a full two weeks of COVID-19 leave for the prior quarantine or isolation period. Moreover, while the guidance makes clear that it is not recommended that an employee be tested to discontinue isolation or quarantine, if an employee continues to test positive for COVID-19 at the end of a quarantine or isolation period, the employee cannot report to work, will be allowed to take a another two weeks of leave, and is entitled to sick leave as required by the Law. Employers may require employees to provide proof of a positive COVID-19 test prior to approving additional leave under the Law.
- If an employer, pursuant to its own policies or practices, requires an employee to remain out of work due to actual or potential COVID-19 exposure, and that employee is not subject to a mandatory quarantine or isolation order under state restrictions, the employer must continue to pay the employee for so long as the employee is required to remain out of work or until the time the employee actually becomes subject to a mandatory order of quarantine or isolation, at which time the employee would then switch to receiving leave under the Law.
- Employees will not be permitted to take more than three separate leaves under the Law, and the second and third leave occurrences must be based on the employee personally testing positive for COVID-19.
Given that the new guidance apparently authorizes tripling the length of New York’s COVID-19 sick leave entitlements, it could be interpreted as conflicting with the plain language and intent of the Law (which contemplates only a single two-week period of leave) and may be subject to legal challenge. Employers should consult with counsel to carefully consider how to apply this guidance when employees request multiple periods of leave under the Law.
New York State Enacts Law Providing Paid Time Off for Employees to Receive COVID-19 Vaccine
New York Governor Andrew Cuomo recently signed legislation S.2588-A now in effect, which states all New York employees are eligible for fully paid, job-protected leave in order to receive a COVID-19 vaccine. Employees who receive a vaccine that requires two injections will be eligible to take two separate four-hour leave periods, while an employee who receives a vaccine requiring a single injection will be eligible for one four-hour period of leave. Vaccine leave is independent of, and in addition to, any other forms of paid leave available to the employee.
While the law does not set forth whether employers can require employees to provide proof they were vaccinated, it expressly prohibits discrimination or retaliation against any employee taking vaccination leave.
The law expires on December 31, 2022.
Washington, D.C. Ban on Non-Competition Agreements
In January 2021, Washington, D.C. Mayor Muriel Bowser signed into law the Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act"), one of the country’s broadest prohibitions on the use of employee restrictive covenants. The Act is projected to take effect in the fall of 2021 (the effective date is tied to budgetary approvals), and it prohibits:
- Non-competition restrictions on all employees working in D.C., regardless of position or salary level, with two notable exceptions: (a) licensed physicians with an annual salary of at least $250,000; and (b) officers of religious organizations.
- Workplace policies that restrict an employee from being simultaneously employed by another person, performing services for pay for another person or operating the employee’s own business.
- Retaliation against employees who refuse to sign agreements rendered unlawful by the Act, or who seek protection or otherwise exercise their rights under the Act.
Based on its plain language, the Act prohibits an employer from prohibiting an employee from working simultaneously for a direct competitor. It is unclear whether such a scenario was intended by the drafters. Nevertheless, the Act allows employers to continue to enforce agreements and policies that restrict employees from disclosing the employer’s confidential, proprietary or sensitive business information (including client/customer lists) and trade secrets under the Uniform Trade Secrets Act. Thus, where simultaneous employment (with a competitor or otherwise) would involve such disclosure, employers would have a credible basis to prohibit it.
Further, the Act’s prohibition on non-competition agreements does not apply to such agreements when entered into in conjunction with the sale of a business.
Employers who violate the Act may face both administrative fines and civil liabilities. Further, the Act is prospective in application, i.e., it will apply to agreements entered into after the effective date. However, employer policies that pre-date the Act—for example, an anti-moonlighting or exclusive service policy—would be subject to the Act if they continue in existence after the effective date. As such, covered employers should carefully review their agreements and policies applicable to D.C. employees.
Finally, the Act requires all employers operating in D.C. to provide the following written notice to D.C.-based employees: “No employer operating in the District of Columbia may request or require any employee working in the District of Columbia to agree to a non-compete policy or agreement, in accordance with the Ban on Non-Compete Agreements Amendment Act of 2020.” Employers must provide such notice within 90 calendar days after the so-called “applicability date” (presumably, this means the effective date, but this is currently unclear) of the Act; within 7 calendar days of the start of an employee’s employment; and within 14 calendar days of an employee’s written request for the notice.
Given the Act’s sweeping implications, D.C. employers should not only review their non-compete, confidentiality and employment agreements for unenforceable non-competition clauses, but they should audit all employment policies that restrict competitive employment, including anti-moonlighting policies, conflict of interest provisions, duty of loyal clauses and policies that restrict non-work related activities during business hours and/or require an employee’s “full time and attention.”
Update on Workplace Vaccine Policies
As vaccine supply expands and more employees become vaccination-eligible, employers are urged to continue to consult federal and state laws and guidelines as they craft and implement workplace vaccination polices. In addition to guidance from the federal Equal Employment Opportunity Commission (EEOC), summarized in our December 2020 Update, California’s Department of Fair Employment and Housing (DFEH) has updated its COVID-19 guidance to include helpful FAQs regarding the “do’s and don’ts” of vaccine policies.
Especially with a mandatory vaccine rule (as a condition of returning to/entering the workplace), but even where less aggressive—such as “strongly encourage” polices—are implemented, employers must adhere at all times to federal and state anti-discrimination laws, and maintain a consistent protocol for gathering and recording vaccine proof from personnel so as to adhere to medical privacy laws.