Yes, you may release cover or tribute versions of songs. However it is your responsibility to clear any existing third party rights on the music you submit to stores through Level. For more clarity about this, please visit our Distribution Terms (Article 6, Section a).
Also and for distribution within the United States, you should contact www.harryfox.com to understand the process of acquiring a mechanical license.
Please note that when you submit a cover or tribute recording, you must not mention the original recording artist anywhere in your release; if you do, it will not be published by any music service.