Per the Department of Labor, in order to deny CARES Act sick leave or FMLA, the employer must be able to prove:
(1) Such leave would cause the small employer's expenses and financial obligations to exceed available business revenue and cause the small employer to cease operating at a minimal capacity;
(2) the absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the small employer because of their specialized skills, knowledge of the business, or responsibilities; or
(3) the small employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and these labor or services are needed for the small employer to operate at a minimal capacity.
For reasons (1), (2), and (3), the employer may deny paid sick leave or expanded family and medical leave only to those otherwise eligible employees whose absence would cause the small employer's expenses and financial obligations to exceed available business revenue, pose a substantial risk, or prevent the small employer from operating at minimum capacity, respectively.
These exemptions will not apply to most employees, so beware denying leave to employees who don't fit these criteria. If a small employer decides to deny paid sick leave or expanded family and medical leave to an employee, the small employer must document the facts and circumstances that meet the criteria to justify the denial.
All covered employers are required to post this poster describing CARES Act rights.
Frankly, covered employers who deny this leave are pretty idiotic because they get dollar-for-dollar tax credits for all wages paid under this leave.
For more on the leave requirements and penalties for violations, see the DOL website here.