For the first time, you can now use your Apple Watch to unlock your iPhone when you’re wearing a face mask.
With iOS 14.5 and watchOS 7.4, Apple is making it easier to unlock an iPhone when you're wearing a mask. There's a new "Unlock with Apple Watch" feature that allows the iPhone to use an unlocked and authenticated Apple Watch as a secondary authentication method.
Unlock your iPhone with Apple Watch
To enable the Unlock with Apple Watch feature, open the Settings app on your iPhone, then look for the “Face ID & Passcode” setting. Once you flip this toggle, your Apple Watch will be able to authenticate your iPhone as long as the following conditions are met:
Face ID detects a mask
Your Apple Watch is nearby
Your Apple Watch is on your wrist
Your Apple Watch is unlocked
Your Apple Watch has a passcode enabled
Another thing to keep in mind here is that if you disable the Apple Watch wrist detection feature, then you will not be able to unlock your iPhone with your Apple Watch.