Potential Employment Law Issues Arising From the COVID-19 Pandemic (Part I)

May 11, 2020

By: Stephen B. Stern

This is the second in a series of articles we will post regarding legal issues that businesses of all sizes should consider when navigating shelter-in-place orders during the COVID-19 pandemic and as they prepare for the “reopening” of the economy.  As companies try to adjust to the COVID-19 business environment, there are many areas of employment law that present potential liability for companies.  This article identifies and describes a number of employment law issues that may arise from the COVID-19 pandemic.  

•    Families First Coronavirus Response Act (“FFCRA”) Compliance:  Companies are still learning the limits and application of the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act, 29 U.S.C. § 2601 et seq.  There are enumerated criteria in these statutes for when paid leave is available and at what rate(s) employees must be paid, but those criteria are not always clear.  For example, with so many people still not able to get tested for COVID-19 or see a health care provider when experiencing symptoms, it may be difficult to determine when an employee is “seeking a medical diagnosis” related to COVID-19, which in turn may make the employee’s eligibility for paid leave unclear.  In addition, there are various exemptions from the paid leave requirements, some of which may apply entity-wide and some may apply only to certain employees, but the scope and application of these exemptions may be ambiguous in some instances.  For example, there are certain types of health care providers where it is not entirely clear whether they qualify for the “health care provider” exemption.  Also by way of example, with respect to the small business exemption (with a small business having fewer than 50 employees), in many instances, it likely will require a fact-intensive analysis to determine whether granting leave to a particular employee would “jeopardize the viability of the business as a going concern” and, even then, it is not clear what an employer will need to prove to establish that granting leave to a particular employee would “jeopardize the viability of the business as a going concern.”  In addition to the many new standards that have been established and trying to understand the various ambiguities, it is important for businesses to remember that, although leave under these statutes is available only through the end of 2020, certain provisions require compliance beyond 2020.  These and many other issues require careful analysis and coordination with counsel for those businesses trying to comply with the FFCRA.  It is not yet known whether the FFCRA will result in a wave of litigation and, if it does, it is unclear how narrow or expansive courts will interpret many provisions and how courts will apply the respective burdens of proof to each party.  

•    Wage/Hour Compliance:  With so many employees working from home, work schedules may not be following the typical patterns and it is very difficult for employers to monitor the number of hours employees actually work.  If a nonexempt employee reports he/she worked an entire day, the employer generally must pay the employee for a full day of work, even if the employer is skeptical that the employee actually worked all the reported hours.  If the employer is able to prove the employee is engaging in timecard fraud, however, that my lead to a different outcome.  Employers also should be monitoring whether employees are working more than 40 hours in a workweek, such as working (as that term is defined in the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”)) during meals or scheduled breaks or responding to emails during nonworking hours.  It is important for employers to effectively communicate expectations to minimize exposure to overtime liability and other potential FLSA violations.  Employers should review their handbooks to make sure work hours of work, including overtime, are clearly defined and worked only when authorized, especially with employees working remotely from home.  For those businesses where employees are still visiting the office, warehouse, factory, plant, or other facility and employees are required to undergo certain safety procedures related to COVID-19 prevention, it is unclear whether such activities will constitute preliminary or post-liminary activities that are compensable under the FLSA.  These are just a sampling of the potential FLSA issues that employers may face with COVID-19.

•    Wage Payment Compliance:  While wage/hour compliance typically falls under the FLSA and comparable state statutes, most states have implemented wage payment and collection laws that obligate employers to pay employees wages they have earned and comply with other requirements related to the payment of wages that are independent of the payment of a minimum wage and overtime.  For example, with payment of yearly bonuses at some companies deferred until the end of the first quarter of the following calendar year, some companies may have elected not to pay 2019 bonuses by the end of March 2020 in an effort to preserve cash.  The failure to pay such bonuses may violate the wage payment and collection laws in certain states.  In addition, many businesses have implemented pay cuts to manage cash flow and additional pay cuts are likely forthcoming while the economy operates on a limited basis.  It is important that employers understand the requirements of applicable state wage payment and collection laws that include any notification requirements to employees related to a reduction in pay, whether the reduction comes in the form of a salary reduction, modified bonus or commission plan, or otherwise.  Also by way of example, as layoffs and furloughs are implemented, employers should be mindful of each state’s obligations, if any, regarding the timing of an employee’s final paycheck and whether any unused leave must be paid.

•    WARN Act Compliance:  For larger companies (those having more than 100 full-time employees, with some exceptions based on length and hours of employment of employees), 60 days written notice generally is required when implementing a mass layoff or plant shutdown (as those terms are defined in the WARN Act, 29 U.S.C. § 2101 et seq.).  Most, if not all, of the mass layoffs and plant shutdowns during the first few weeks of COVID-19 likely were exempt from the notification requirement under the “unforeseeable business circumstances” exemption.  Companies should not assume, however, that all future mass layoffs and/or plant shutdowns related to COVID-19 necessarily will be exempt from the notification under the “unforeseeable business circumstances” exemption.  For example, many companies that continue to operate likely are making projections about future budgets, which may include (first time or additional) layoffs and/or plant shutdowns in response to certain developments that might come to fruition and it is possible that the occurrence of some of those future developments will not qualify for the “unforeseeable business circumstances” exemption.  Besides the federal statute, depending on the state in which the plant shutdown or mass layoff occurs, there may be state (or “mini”) WARN Act obligations as well.

•    OSHA Compliance:  For those companies with employees still going to the office, plant, warehouse, store, or other location that constitutes the workplace, they should be implementing safety protocols to provide a safe work environment for employees.  Other companies that are operating, but on a more remote basis through telecommuting, should expect employees will return to the workplace while social distancing protocols remain in effect.  Those businesses should be planning now how they will implement appropriate social distancing protocols so they can get their employees back to work safely as quickly as possible.