The Families First Coronavirus Response Act: Employer Paid Leave Provisions & Tax Credits Explained– March 20, 2020 by Cynthia Pedersen

To combat the negative financial effects of the COVID-19 pandemic on working Americans, President Trump signed into law The Families First Coronavirus Response Act. In addition to multiple provisions aimed at expanding protections for employees who cannot work due to the COVID-19 virus, the Act offers related employer tax credits.

Each provision applies to employers with fewer than 500 employees and is effective beginning on April 2, 2020. The Act expires on December 31, 2020. Note that employers with less than 50 employees may be excluded from the Act through regulations provided by the Secretary of Labor if it is determined that complying with the Act would jeopardize the small business’ viability. Absent such regulations, all employers with less than 500 employees should be aware of the following provisions.

>> Read "CARES Act Offers 14 Areas of Potential Tax Relief for Taxpayers" for changes to the Families First Coronavirus Response Act made by the CARES Act

Emergency Family and Medical Leave Expansion Act (FMLA)

The FMLA expansion Act expands the Family Medical Leave Act (FMLA) to provide 12 weeks of job-protected leave for employees who are unable to work (or telework) because they need to care for their children under 18 if:

  • The children’s school or place of care has been closed, or
  • A child care provider is unavailable due to the COVID-19 emergency as declared by a federal, state or local authority.

Expanded FMLA Benefit Explained

  • The initial 10 days of leave are unpaid; however, eligible employees may elect to use accrued personal or sick leave during this period (see Sick Leave provisions following). Although additional paid leave may be available, employers may not require employees to use that leave before receiving the expanded FMLA benefit.
  • After the initial 10 days of leave, employers must compensate employees in an amount that is not less than two-thirds of the employee’s regular rate of pay based on the employee’s regular work schedule up to a maximum of $200 per day or $10,000 in the aggregate.
  • This leave benefit covers employees who have been working for the same employer for at least 30 calendar days.
  • Those working for employers with 25 or more employees that use this benefit are entitled to reinstatement to the same or an equivalent position after the 12 week period. Those working for employers with less than 25 employees are also entitled to reinstatement unless the employee’s position no longer exists due to economic conditions or other changes in operating conditions caused by the COVID-19 public health emergency. If the employee’s position no longer exists, the employer must make reasonable efforts to restore the employee to an equivalent position or make reasonable efforts for at least a year to contact the employee if an equivalent position becomes available.

Employer Refundable Tax Credit for Expanded FMLA Leave
Employers who pay wages to eligible employees under the expanded FMLA are eligible for a refundable credit of the quarterly payroll taxes imposed on the employer for 100% of the qualified family leave wages paid by the employer in each calendar quarter. As stated above, the amount of qualified family leave wages with respect to any employee shall not exceed $200 per day or $10,000 in the aggregate. This credit is claimed on the employer’s quarterly filing of Form 941; it does not reduce payroll tax deposit requirements. However, the CARES Act, introduced to the Senate Finance Committee on March 19, 2020, and making its way through the legislative process, would allow an employer to consider credits in making their payroll deposits.

This credit also applies to eligible self-employed individuals that would have qualified for FMLA leave if they were employees. The qualified family leave credit amount is determined with respect to the number of days the self-employed individual is unable to work (not to exceed 50 days) multiplied by the lesser of:

  • $200, or
  • 67% of the average daily self-employment income of the individual for the taxable year.

The term average daily self-employment income means an amount equal to the individual’s net earnings during the taxable year divided by 260.

Emergency Paid Sick Leave Act

Under certain conditions, full-time employees must receive 80 hours of paid sick leave and part-time employees must receive a number of hours of paid sick leave equal to the number of hours that such employee would work on average over a two-week period. This benefit is available to employees regardless of how long the employee has worked with the employer.

Paid Sick Leave Explained

  • Employers must compensate employees for eligible paid sick leave at the employee’s regular rate of pay. However, if such sick leave is used for providing care to another individual (including the employee’s child), the rate of pay may be limited to two-thirds of the employee’s regular earnings.
  • Circumstances triggering the emergency paid sick leave are limited to if an employee:
    • Is subject to a federal, state or local quarantine or isolation order related to COVID-19.
    • Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
    • Is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
    • Is caring for an individual who is subject to an order by a federal, state or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
    • Is caring for their child if the school or place of care has been closed, or a child care provider is unavailable due to COVID-19 precautions.
    • Is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
  • Any employee receiving emergency paid sick leave because the employee is subject to a federal, state or local quarantine, advised by a health care provider to self-quarantine, or is seeking a medical diagnosis is limited to the lesser of their regular rate of pay or $511 per day not to exceed $5,110 in the aggregate.
  • Any employee receiving emergency paid sick leave because the employee is caring for an individual who is subject to a federal, state or local quarantine, was advised by a health care provider to self-quarantine, is caring for their child during a school or care provider closure due to the COVID-19 precautions or is experiencing any other substantially similar condition is limited to the lesser of their two-thirds of the employee’s regular rate of pay or $200 per day not to exceed $2000 in the aggregate.
  • Employers may not require, as a condition of providing paid sick leave under the Act, that the employee involved search for or find a replacement employee to cover the hours during which the employee is using paid sick leave. Additionally, employers may not require an employee to use other paid leave provided by the employer before the employee uses the paid sick leave under the Act.
  • The Act requires employers to post on its premises a notice to be prepared and approved by the Secretary of Labor, advising employees of their rights to this emergency paid sick leave.

Employer Tax Credit for Paid Sick Leave
Employers who provide paid sick leave are eligible for a refundable credit of the quarterly payroll taxes imposed on the employer up to 100% of the paid sick leave wages paid by such employer in each calendar quarter. This credit also applies to eligible self-employed individuals in the amount equal to the qualified sick leave equivalent with respect to the individual. The qualified sick leave equivalent amount with respect to a self-employed individual means the number of days the individual is unable to work multiplied by the lesser of:

  • $200 ($511 in the case of any day of paid sick time required due to the individual’s illness or requested/required quarantine), or
  • 67% (100% in the case of any day of paid sick time required due to the individual’s illness or requested/required quarantine) of the average daily self-employment income of the individual for the taxable year.

The term average daily self-employment income means an amount equal to the individual’s net earnings during the taxable year divided by 260.

This credit is claimed on the employer’s quarterly filing of Form 941; it does not reduce payroll tax deposit requirements. However, if the CARES Act becomes law, which, as noted above is currently under review by the Senate Finance Committee, it would allow an employer to consider credits in making their payroll deposits.


To combat the economic crisis unfolding due to the spread of the COVID-19 virus, the U.S. government may continue to issue new guidance. Cohen & Company will continue to monitor this guidance and interpret the tax implications for our clients. Please consult with your attorneys on the labor impact of this new Act.

Read the legislation here.

Contact Cynthia Pedersen at cynthia.pedersen@cohencpa.com or a member of your service team to discuss this topic further.


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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.