Families First Act: Paid Sick Leave, FMLA, and Tax Credits

The Families First Coronavirus Response Act, signed into law on March 18, 2020 as Public Law 116-127, was the first federal statute to require private employers to provide paid sick leave. It obligated employers with fewer than 500 employees to give workers up to 80 hours of emergency paid sick leave and up to 12 weeks of expanded family leave for COVID-19 reasons, and it reimbursed the cost through refundable payroll tax credits. The leave mandate expired on December 31, 2020, and the last window to claim or correct the associated tax credits closed on April 15, 2025.¹²

Two later laws extended the tax credits for employers who kept offering leave voluntarily. The Consolidated Appropriations Act of 2021 carried the credits through March 31, 2021, and the American Rescue Plan Act extended them through September 30, 2021. Neither renewed an employee’s right to demand the leave.

Which Employers Were Covered

The mandate reached all private employers with fewer than 500 employees at the moment an employee would have taken leave, plus most public-sector employers regardless of size. The 500 count included full-time and part-time workers, employees on any type of leave, temporary workers, and day laborers supplied by staffing agencies. Independent contractors and workers who had been laid off or furloughed were excluded from the count.³

Joint employers and integrated businesses had to combine their headcounts, so a franchisee with 40 direct employees could still cross the threshold through affiliation. Employers with 500 or more employees fell outside the mandate entirely, though many adopted similar policies on their own.

Small Business Exemption for Childcare Leave

Employers with fewer than 50 employees could claim an exemption from the childcare-related leave only. To use it, an authorized officer had to determine that one of three conditions applied: providing the leave would push expenses above revenue and force the business below minimum operating capacity; the employee’s absence would pose a substantial risk because of specialized skills or responsibilities; or the employer could not find enough qualified replacement workers. Each request had to be evaluated individually, and the reasoning had to be documented in the employer’s own files. Nothing was submitted to the Department of Labor, but undocumented denials left the employer exposed to challenge.

Emergency Paid Sick Leave

The Emergency Paid Sick Leave Act gave full-time employees up to 80 hours of paid time off. Part-time employees received the equivalent of the hours they averaged over a two-week period. For irregular schedules, the average was calculated by looking at the six months before the leave began, dividing total scheduled hours by the calendar days in that window, and multiplying the daily average by 14.³

Six qualifying reasons triggered the leave:

A federal, state, or local COVID-19 quarantine or isolation order preventing the employee from working.
A health care provider’s advice to self-quarantine because of COVID-19 concerns.
The employee was experiencing COVID-19 symptoms and seeking a diagnosis.
The employee was caring for someone under a quarantine order or medical self-quarantine advice.
The employee’s child’s school or daycare had closed, or the regular care provider was unavailable, because of COVID-19.
Any substantially similar condition specified by the Secretary of Health and Human Services.

The first three reasons, tied to the employee’s own health, were paid at the regular rate (or the applicable minimum wage if higher), capped at $511 per day and $5,110 total. The last three reasons, tied to caring for others or to school and childcare closures, were paid at two-thirds of the regular rate, capped at $200 per day and $2,000 total. The two-thirds rate for caregiving surprised many workers who assumed the benefit was uniform.³

Expanded Family and Medical Leave for Childcare

The Emergency Family and Medical Leave Expansion Act added a new qualifying reason to the existing FMLA: caring for a child whose school or daycare had closed because of COVID-19. It gave up to 12 weeks of job-protected leave to employees who had been on the payroll for at least 30 calendar days, a far shorter tenure than the standard FMLA threshold of 12 months and 1,250 hours.⁴

The first 10 workdays were unpaid, but employees could substitute any accrued paid time off during that period, including the 80 hours of emergency paid sick leave from the other provision. After the initial 10 days, employers paid two-thirds of the regular rate, capped at $200 per day and $10,000 total per employee.

Because this operated as an FMLA expansion, employees were generally entitled to reinstatement in the same or an equivalent position when leave ended. Employers with fewer than 25 employees had a narrow exception: they could deny reinstatement if the position no longer existed because of economic conditions caused by the public health emergency, but they still had to make reasonable efforts for up to a year afterward to find an equivalent role.

Credits for Self-Employed Workers

Self-employed workers were covered through a parallel mechanism. Eligible individuals claimed refundable tax credits on their personal returns using Form 7202, with the same daily and aggregate caps that applied to employees: up to $511 per day for the worker’s own health and up to $200 per day for caregiving. The daily amount was calculated by dividing annual net self-employment earnings by 260 working days, with caregiving leave paid at two-thirds of that figure. The individual had to regularly carry on a trade or business and would have qualified for the leave if working for someone else. Form 7202 applied only to tax years 2020 and 2021 and is no longer in use.⁵

How the Employer Tax Credits Worked

The government offset the cost of the mandate through refundable payroll tax credits rather than direct payments. Employers kept federal payroll taxes they would otherwise have deposited, and if leave costs exceeded that liability, they could request the difference as a refund. Credits were reported on Form 941, the Employer’s Quarterly Federal Tax Return.⁶

Documentation had to include each employee’s name, the dates leave was taken, a written statement from the employee explaining the COVID-19 qualifying reason, and the regular rate of pay used in the calculation. If the leave involved a school or daycare closure, a copy of the closure notice or public announcement was also required.

These credits can no longer be claimed. Corrections were made on Form 941-X, and the IRS confirms the period of limitations expired on April 15, 2024, for wages paid in 2020 and April 15, 2025, for wages paid in 2021.²

Anti-Retaliation Protections

The FFCRA prohibited employers from firing, disciplining, or otherwise retaliating against employees who used their leave or reported violations, and it applied to both the paid sick leave and the expanded family leave provisions. Enforcement ran through the Department of Labor’s Wage and Hour Division using the same mechanisms available under the Fair Labor Standards Act. Because the protections attached to conduct that occurred while the mandate was in effect, retaliation cases could reach beyond the December 2020 expiration of the leave itself.

Health Coverage and Nutrition Provisions

The law also required health insurance plans to cover COVID-19 diagnostic testing with no out-of-pocket cost. Deductibles, copayments, and coinsurance were eliminated for testing-related visits and lab fees, and the rule reached group plans, individual market coverage, and grandfathered plans normally exempt from many Affordable Care Act requirements.⁷ The testing coverage requirement was tied to the COVID-19 public health emergency, which the federal government ended on May 11, 2023. After that date, plans were no longer required to waive cost-sharing for COVID-19 tests.

The FFCRA’s nutrition provisions reached further and lasted longer. The law authorized the USDA to grant operational waivers to state WIC agencies, allowing remote certifications and other flexibility during surging caseloads.⁸ It also authorized SNAP emergency allotments, letting states temporarily raise household benefits up to the maximum for their household size, a provision that stayed active for years and ended state by state as emergency declarations lapsed. Approximately $450 million went to The Emergency Food Assistance Program to support food banks facing unprecedented demand.

1
U.S. Department of Labor. U.S. Department of Labor Publishes Guidance on Expiration of Paid Sick Leave and Expanded Family and Medical Leave for Coronavirus
2
Internal Revenue Service. Instructions for Form 941-X
3
Federal Register. 29 CFR 826 – Paid Leave Under the Families First Coronavirus Response Act
4
Congressional Research Service. The Families First Coronavirus Response Act Leave Provisions
5
Internal Revenue Service. Instructions for Form 7202 Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals
6
Internal Revenue Service. COVID-19-Related Tax Credits: Basic FAQs
7
U.S. Department of Labor. FAQs About Families First Coronavirus Response Act, Coronavirus Aid, Relief, and Economic Security Act, and Health Insurance Portability and Accountability Act Implementation Part 58
8
Food and Nutrition Service. The Use and Impact of Federal Waivers During the COVID-19 Pandemic: Summary Findings From Surveys of WIC State and Local Agencies