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Covid-19 coronavirus: an overview of U.S. federal legislation phases 1 and 2

This note summarizes the important legal changes for U.S. businesses to come out of the two Covid-19 coronavirus relief laws enacted in March 2020.


U.S. Covid-19 legislation has occurred in three phases.

President Donald Trump has signed three relief acts into law. The first, the "Coronavirus Preparedness and Response Supplemental Appropriations Act," H.R. 6074, Pub. L. 116-123 ("Phase 1") was signed on March 6, 2020. The second, the "Families First Coronavirus Response Act," H.R. 6201, Pub. L. 116-127 ("Phase 2") was signed on March 18, 2020. A third, $2 trillion stimulus bill, the "Coronavirus Aid, Relief, and Economic Security Act," H. R. 748 ("Phase 3"), was passed by the Senate in a 96-0 vote on March 25, 2020 and quickly approved by voice vote in the House of Representatives and signed by the President on March 27, 2020. Allen & Overy has published a separate discussion of the Phase 3 bill, due to its historic scope and subject matter, which is available here. This note will focus on Phases 1 and 2.

Both Phase 1 and Phase 2 focus primarily on public health measures, although Phase 2 also contains several labor and employment and tax provisions that will affect private businesses employing fewer than 500 people. This note focuses on the Phase 2 labor and employment and tax provisions.[1]

Measures passed

Emergency Family and Medical Leave Expansion Act:

The Emergency Family and Medical Leave Expansion Act is a temporary expansion of the existing Family and Medical Leave Act ("FMLA") to afford greater benefits to employees affected by Covid-19.


The Act brings more employees under FMLA protection by mandating paid family and medical leave for employees who need to care for a child at home due to Covid-19 closures. It offsets the increased expense through employer tax credits.


This Act temporarily expands the FMLA to cover leave for an employee who is unable to work or telework due to a need to care for a son or daughter under 18 years of age, if the son or daughter's school or child care has been closed due to a Covid-19 emergency declared by a federal, state, or local authority.

The first ten days of FMLA leave that an employee takes may be unpaid. After the first ten days, the employer must pay the employee at no less than 2/3 the regular rate of pay, at the regular number of hours, provided that the pay does not exceed $200 per day or $10,000 in total, per employee.

Emergency Paid Sick Leave Act:

The Emergency Paid Sick Leave Act is a counterpart to the FMLA extension, providing a temporary expansion of employer sick leave obligations to employees affected by Covid-19.


This Act makes several types of employees who are affected by Covid-19 qualify for sick leave, whom absent the Act, may not qualify as "sick." It also offsets the increased expense through the same employer tax credits as allowed in connection with the FMLA provisions.


Employers are now required to provide paid sick leave for employees who are unable to work or telework due to:

  1. A government quarantine or isolation order;
  2. Medical advice to self-quarantine;
  3. Seeking a medical diagnosis for Covid-19 symptoms;
  4. Caring for any individual who is under a government quarantine or isolation order or who is under medical advice to self-quarantine;
  5. Caring for a son or daughter whose school or child care is unavailable due to Covid-19 precautions;
  6. Experiencing any "other substantially similar condition."

The employer will be obligated to pay for up to 80 hours of this sick leave for full time employees. Part-time employees would be owed an amount equal to the average number of hours worked over a 2-week period. However, paid sick time shall not exceed:

  • $511 per day and $5,110 in aggregate for the reasons listed in points (1)-(3) above; and
  • $200 per day and $2,000 in the aggregate for the reasons listed in points (4)-(6) above.


The provisions of each Act take effect on April 2, 2020. They both expire on December 31, 2020.


Both the FMLA and the sick leave law apply to every private employer that employs fewer than 500 people, as well as to certain specified government agencies.


See Department of Labor Press Release.

Tax Credits for Paid Sick and Paid Family and Medical Leave:

A final section of H.R. 6201 provides tax credits to the employers affected by the FMLA or sick leave provisions of the Act.


The tax credits are meant to offset the costs to employers associated with the Act's expansion of FMLA and sick leave payments. Notably, they only apply to employers affected by those expansions (i.e., with 500 or fewer employees). Employers with more than 500 employees would not be affected by the FMLA or sick leave changes and therefore do not qualify for a tax credit.


An employer covered by the Act may claim 100% of the FMLA or sick leave that it pays in any calendar quarter as a tax credit, up to the monetary limits permitted in the Covid-19 laws described above.

Employers may also obtain tax credits in such amount as expenses for a qualified group health plan increase due to FMLA or sick leave.

Any wages paid under FMLA or sick leave shall not count as wages for purposes of calculating an employer's wage excise taxes under section 3111(a) of the Internal Revenue Code.

Employers may also claim tax credits to cover the cost of hospital insurance excise taxes under section 3111(b) of the Internal Revenue Code due to FMLA or sick leave. 

[1] Set forth in Appendix A to this note is a table of contents listing each section contained in Phase 1 and Phase 2.

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