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NOTE: Because of the ever-changing COVID-19 legal environment, employers should consult with their inside or outside counsel for the latest developments and updated guidance on these topics. Please also see our return to work FAQ’s and numerous other articles on COVID-19 topics.
Q-1. What laws should we be concerned about?
Employers should ensure they are following all applicable federal, state and local laws, which include, among other enactments, stay at home, shelter in place, essential services, or return to work orders, paid and unpaid leave statutes and ordinances, workplace safety, privacy, wage and hour, workers compensation, unemployment, layoff, furlough, discrimination, retaliation, and accommodation laws.
In addition to the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act. (CARES Act), some of the major federal laws most likely to confront employers during the COVID-19 crisis are:
- the Americans with Disabilities Act (ADA),
- Title VII of the Civil Rights Act of 1964 and state and local anti-discrimination laws,
- the Genetic Information Nondiscrimination Act (GINA),
- the National Labor Relations Act (NLRA),
- the Family and Medical Leave Act (FMLA),
- the Health Insurance Portability and Accountability Act (HIPAA),
- the Fair Labor Standards Act (FLSA),
- the Worker Adjustment and Retraining Notification (WARN) Act, and
- the Occupational Safety and Health Act (OSHA).
These laws continue to apply to certain covered employers during the COVID-19 pandemic, although, according to the EEOC, they should not interfere with or prevent employers from following the guidelines and suggestions made by the CDC or state/local public health authorities.
State and local laws and orders may dictate additional requirements to be followed in light of the COVID-19 pandemic, such as when employees may return to work following leave, permissible documentation employers may request or require from employees who return to work following leave, any rights afforded to employees such as protected leave and/or paid leave, and personal protective coverings and other protocols for employers and employees.
Additional legislation is being considered at the federal, state and local levels regarding everything from business and employer liability to workplace safety to paid time off, so employers should be ready for and assume a changing legal environment.
Employers should not neglect any applicable employment policies, requirements of benefits plans, employment agreements and collective bargaining agreements, or agreements with customers, suppliers or contractors that may also apply.
Q-2. How should employers respond to employee requests to work from home or not work at all due to fear of COVID-19 exposure (without any current exposure or symptoms)
Generally, employees are not entitled to leave or to telework to avoid illness (although, teleworking, if possible to fulfill an employee’s job responsibilities, is a recommended infection-control strategy per the CDC, EEOC, and other authorities). Employers should consider whether employees are entitled to reasonable accommodations (e.g., telecommuting or otherwise) under the ADA due to a pre-existing health condition. Reasonable accommodations could offer protections to an individual whose disability puts him/her at a greater risk from COVID-19 and who requests, or apparently needs accommodations to eliminate or diminish the prospects of potential exposure. Some accommodations may meet an employee’s needs on a temporary basis without causing an undue hardship on the employer (see FAQ below where this issue is discussed in greater detail). Employers should, therefore, review requests on a case-by-case basis to ensure they do not subject an employee to an unreasonably high risk of contracting COVID-19. An employee requesting an accommodation to avoid exposing a family member who is at greater risk from COVID-19 is not entitled to an accommodation under the ADA. (See EEOC Guidance, Question D-13). Employers may consider such requests, but are not required to do so.
Employers may also consider allowing employees to invoke accrued, unused vacation time or PTO or other types of leave. Employers also should give thought to occupational safety and health laws prohibiting employers from terminating an employee who refuses, in good faith, to expose him/herself to a dangerous job condition and who has no reasonable alternative but to avoid the workplace. Employers also may refer employees to an employee assistance program and otherwise offer information and support when responding to inquiries of this sort from employees.
Q-3. How do I handle accommodation requests during COVID-19?
If an employee requests an accommodation due to his/her disability, or if the employer has reason to believe an employee has special needs, the employer needs to enter into a dialogue with the employee to ascertain if there is a reasonable accommodation that can be provided in his/her home to address those needs. If there is a reasonable accommodation that addresses those needs, the employer needs to provide it. An employee who already was receiving a reasonable accommodation prior to the COVID-19 pandemic may be entitled to a continuing or an additional or adjusted accommodation during the pandemic (for example, where the employee previously worked in the office, but due to COVID-19, is now working remotely and needs additional equipment to perform his or her job). Employers also may need to consider reasonable accommodations for individuals whose disabilities put them at a greater risk from COVID-19 (or severe symptoms from COVID-19) and who appear to need or who request accommodations to eliminate possible exposure to the virus. Some accommodations may satisfy an employee’s needs on a temporary basis without an undue hardship on the employer. NOTE: if a particular accommodation would result in an undue hardship for the business, the employer does not need to provide it. However, flexibility by employers and employees is important in determining if an accommodation is available under the circumstances. Per the EEOC, short-term restructuring of marginal duties, temporary transfers to different positions, or modifying work schedules or shift assignments may permit an individual with a disability to perform safely the essential functions of his/her job while reducing exposure to others in the workplace or to themselves while commuting. All reasonable accommodation decisions are fact-specific and vary based on the relevant circumstances.
Q-4. If an employee contracts COVID-19 while working, can the employee pursue a claim for workers’ compensation benefits?
Maybe. Whether or not these claims are compensable under a particular state’s workers’ compensation laws depends on various factors, and is determined on a case-by-case basis. Generally, workers’ compensation policies and laws cover only injuries or illnesses that are related to the employee’s job. Because COVID-19 is not an injury, it will likely be analyzed under state law to determine whether it is considered an “occupational disease,” which likely involves consideration of these factors:
1. The illness or disease must be “occupational,” meaning that it arose out of and was in the course and scope of the employment; and
2. The illness or disease must arise out of or be caused by conditions “peculiar” to the employee’s job.
Given the vast number of different kinds of occupations and work-settings in our economy, each workers’ compensation claim related to COVID-19 will be fact-specific and individualized.
To be safe, employers should consider providing any such employee with workers’ compensation forms and encourage him/her to complete and submit them if they feel they may be covered under applicable state law.
Q-5. We are considering scanning the temperature of all of our employees and customers before they are allowed on site to ensure no one with a fever is on the premises. Is this legal?
It is generally permissible to test the temperatures of employees during the COVID-19 pandemic. Following any potential exposure, employers or employees can and should measure an employee’s temperature and assess symptoms prior to work (and before the employee enters the workplace) (see CDC Guidance). Even without potential exposure, the EEOC has authorized employers to measure employees’ body temperatures in light of the CDC and state/local health authorities’ acknowledgements that COVID-19 is community spread (see EEOC Guidance, Question A-3). That said, employers should be mindful that some individuals with COVID-19 may be asymptomatic and display no fever.
As for non-employees, such as customers, the U.S. Department of Justice has not yet opined on whether the COVID-19 pandemic permits private entities to conduct temperature testing on such non-employees. The ADA provides certain nondiscrimination protections to individuals with contagious diseases but balances this protection with requirements designed to protect the health of others (for example, such as when an individual poses a “direct threat” to others). However, because the DOJ has not weighed in yet on this issue in light of COVID-19, companies should exercise caution before relying on the “direct threat” or other similar ADA defenses as a basis for temperature or other screenings of customers.
If any screening is performed (whether on an employee, customer, or others), companies should take care to not single out any group based on a protected category, such as national origin or race. Employers should store an employee’s COVID-19 related medical information (such as the results of a temperature test) in the employee’s existing medical files—apart from his/her personnel records—and should maintain the confidentially of this information to the fullest extent possible.
Q-6. Can we require our employees to submit to a medical screening (either voluntary or mandatory) before returning from sick leave or a leave of absence?
Fitness for duty examinations are permitted under the Americans with Disabilities Act (ADA) under certain circumstances. Fitness for duty examinations are also sometimes permitted under state laws too such as California’s Fair Employment and Housing Act (FEHA), so employers should consult the requirements of all applicable laws. In light of the COVID-19 pandemic, the EEOC also will permit employers “to administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus.” (See EEOC Guidance, Question A-6.) The EEOC does not permit employers to require “antibody testing before allowing employees to re-enter the workplace.” (See EEOC Guidance, Question A-7). For employers who choose to test employees, the EEOC tells employers to use “accurate and reliable” tests, taking into account the Food and Drug Administration’s guidance regarding the accuracy and reliability of certain tests. If an employee requests an alternative method of screening due to a medical condition, employers should treat the request as a request for a reasonable accommodation. (See EEOC Guidance G-7 and FAQ 3 above for more information on how to handle a request for a reasonable accommodation).
With regard to vaccines (one is not yet available for COVID-19), the EEOC indicates that employers covered by the Americans with Disabilities Act (ADA) or Title VII of the Civil Rights Act of 1964 cannot during a pandemic compel employees to be vaccinated regardless of medical conditions or religious beliefs. In other words, the EEOC continues to expect employers to make reasonable accommodations for disabilities and religious beliefs. The EEOC recommends that employers simply encourage, as opposed to require, employees to obtain a vaccine, if available, during a pandemic. Under the FEHA, an employer may require an employee to undergo a medical examination to certify fitness for duty upon the employee’s return from a non-FMLA medical leave of absence if there are reasonable safety concerns regarding the employee’s ability to perform the essential job functions. That examination, however, must be job-related and must be a business necessity under the specific circumstances.
See also FAQ 19, relating to fitness-for-duty documentation upon returning to work following an employee’s self-quarantine, COVID-19 symptoms, or remote work arrangement.
Q-7. Can an employer limit an employee’s personal travel plans?
Probably not in some jurisdictions such as New York, but employers can advise employees to restrict work-related travel and may also require an employee to self-quarantine following travel that is personal or work related if recommended by the CDC.
Q-8. Can I disclose the name of an employee who is diagnosed with COVID-19 to other employees, local, state or federal health organizations, or to the general public?
In general, employers are not required to disclose the names of employees who have contracted COVID-19 to other employees or to the general public or to health organizations (except for certain professions). However, an employer may identify employee names and test results to a public health agency or to members of management or others who have a demonstrable “need to know.” Employers should balance privacy interests with safety and health concerns and provide only the information necessary for those involved to take the requisite precautions. Employees may also consent to disclosure. Or, rather than telling other employees the name of the person with COVID-19 so they can determine if they had contact with him/her, an employer may ask the person with COVID-19 for the names of those with whom he/she had contact in the days preceding their symptoms so the employer may inform them of possible exposure.
Q-9. One of our clients is inquiring about the travel and health status of certain employees with whom they will come into contact. What are we allowed to disclose?
Employers always should be cautious about disclosing private information about its employees without their express written consent. However, employers can provide its clients and/or vendors with basic information regarding its workforce. For example, an employer is likely at liberty to disclose whether certain employees have recently traveled overseas and where they traveled. However, employers should be conscious of the confidential status of certain medical information prior to disclosing more specific information without employee consent. Employers should also consider the increased privacy rights in states, such as California, which may further limit the scope of information they would be at liberty to disclose. As a practical matter, a policy that discloses the least amount of information to answer a company’s clients’ and/or vendors’ inquiries is most advisable. Note that some state and local orders provide specific restrictions and obligations on employers upon an employee’s return to work (see, e.g., the Amended Dallas County Order here). Employers should review the latest applicable local orders for relevant details and guidelines.
Q-10. Does HIPAA apply to health information my business is receiving related to employees who have been diagnosed with COVID-19?
Not likely. For most employers (those that are not health care providers covered by HIPAA), this type of health information is received in the employer capacity (e.g., when an employee submits a doctor’s note and calls in sick). However, to the extent employers receive health information about their employees through a group health plan, such information is covered by HIPAA and should not be disclosed without consent other than for treatment, payment, or operational purposes. An employer should not review its group health plan records to determine which employees may have been tested for COVID-19.
Whether or not subject to HIPAA, employers should keep all employee health information confidential and secure, and only use the minimum amount of information necessary on a need-to-know basis for legitimate business reasons (as further discussed above); if an employer does not adhere to these limitations, there are various laws other than HIPAA that could be triggered. Employers should store an employee’s COVID-19 related medical information (such as the results of a temperature test) in the employee’s existing medical files—separate and apart from his/her personnel records—as required by the ADA.
Q-11. What do you tell an employee who is concerned he/she has or has been exposed to COVID-19?
An employer should require any employee who believes he/she has (or has been exposed to) COVID-19, or is experiencing COVID-19 symptoms (such as fever, cough, or shortness of breath), to stay home until he/she has been diagnosed and cleared to return to work by a healthcare provider (See EEOC guidance here; see also FAQ 19 regarding fitness-for-duty documentation upon returning to work). Per the CDC, critical infrastructure workers may continue to work following potential exposure, provided they remain asymptomatic and additional precautions are implemented to protect them and the community (e.g., temperature testing as discussed in FAQ 5 above, requiring the employee to wear a face mask for 14 days following potential exposure, requiring social distancing while at work, maintaining a disinfected and clean work space, and other CDC recommended practices found here). If an employee becomes sick at work during work hours, he/she should be sent home immediately, and his/her workspace should be cleaned and disinfected. Employers should gather a list of individuals who had contact with the sick employee within the previous 48 hours. Employers should designate an employee as the point person for questions of that sort and encourage employees to seek emergency assistance from a medical provider and contact local/state health departments. Employers should tell employees to obtain documentation in connection with test results regarding COVID-19, as there may be additional relief available for which such documentation is required. The Families First Coronavirus Response Act, which took effect on April 1, 2020, includes documentation requirements further discussed here and in the Q&A from the DOL.
Q-12. What does OSHA require employers to do about COVID-19?
OSHA has made its latest guidance available here.
The OSHA guidance (which is not mandatory because it does not constitute a law or regulation) encourages employers to:
- Develop an infectious disease preparedness and response plan (e.g., identifying potential sources of infection in and outside of the workplace, identifying and implementing controls to reduce exposure, such as use of personal protective equipment, preparing for increased absenteeism and supply chain disruptions, and considering downsizing or closing operations);
- Prepare and implement basic infection prevention measures (promoting hand washing, covering coughs and sneezes, and “social distancing,” and encouraging employees to stay home if they are ill);
- Develop procedures for prompt identification and isolation of ill employees/visitors;
- Consider and implement flexible work arrangements, such as working from home, reduced hours, alternating schedules; and
- Follow existing OSHA standards, particularly taking additional measures to maintain a clean and sanitary workplace.
On April 13, 2020, OSHA also issued an Interim Enforcement Response Plan for Coronavirus Disease 2019 (COVID-19) (the “Plan”). The Plan describes the following exposure risk categories in various work settings:
1. High and very high exposure risk jobs are those with high potential for exposure to known or suspected sources of COVID-19. Workplaces falling into this category include, but are not limited to: hospitals treating suspected and/or confirmed COVID-19 patients, nursing homes, emergency medical centers, emergency response facilities, settings where home care or hospice care is provided, settings that handle human remains, biomedical laboratories, including clinical laboratories, and medical transport facilities. OSHA also emphasizes the “very high risk” presented by aerosol-generating procedures, including bronchoscopies, sputum inductions, nebulizer therapies, endotracheal intubations and extubations, open suctioning of airways, cardiopulmonary resuscitations, and autopsies. OSHA identifies these tasks as procedures that need engineering and administrative controls and personal protective equipment.
2. Medium exposure risk jobs include those with frequent and/or close contact with, i.e., within 6 feet of, people who may be (but are not known to be) infected with COVID-19. Workers in this risk group may have frequent contact with travelers returning from international locations with widespread COVID-19 transmission. Workers fall into this category if their jobs locate in areas where there is ongoing community transmission, including, but are not limited to: those who have contact with the general public (e.g., in schools, high-population-density work environments, and some high-volume retail settings).
3. Lower exposure risk jobs are those that do not require contact with people known to be, or suspected of being, infected with COVID-19, nor frequent close contact with, i.e., within 6 feet of, the general public. Workers in this category have minimal occupational contact with the public and coworkers.
The Plan indicates that workplaces in the high and very high exposure risk categories, “such as hospitals, emergency medical centers, and emergency response facilities, will typically be the focus of any inspection activities in response to COVID-19-related complaints/referrals and employer-reported illnesses.” COVID-19 complaints relating to work in the medium or lower exposure risk categories “will not normally result in an on-site inspection.”
In addition, OSHA recognizes that determining whether a COVID-19 exposure is work related and thus recordable on the OSHA 300 log may not be possible at this time. As a result, OSHA has, for now, suspended enforcement of its recordkeeping requirements for COVID-19 cases, with a couple caveats. First, the temporary suspension will not apply to employers in the healthcare industry, emergency response organizations (e.g. emergency medical, firefighting and law enforcement services), and correctional institutions. Employers in these categories must continue to make work-relatedness determinations pursuant to 29 C.F.R Part 1904. Second, all employers must continue to record COVID-19 cases if (a) they have objective evidence that the infection may be work related and (b) it was reasonably available to the employer.
Note that the CDC has provided guidelines to follow and state and local laws and ordinances may describe additional limitations or obligations on employers, such as the scope of protective coverings or similar protocols required for employees.
Q-13. May I require employees to work remotely?
Generally, yes employers can require employees to work remotely, if they can work remotely. Note that some state and local ordinances may require teleworking for employees in certain positions. Employers should consult applicable state and local laws to confirm remote working obligations and limitations, and changes to these obligations as the return-to-work process unfolds.
Q-14. How do I track hours and overtime for employees who work remotely?
Employees must track their work hours and lunch breaks. Employers should require employees to submit weekly electronic time sheets that include total hours worked and a statement affirming the accuracy of the hours of work reported. Overtime policies requiring authorization before working overtime are permitted and apply equally to remote work as to work on site.
Q-15. What should employers do about employees who cannot work on the employer’s premises and cannot work remotely?
Employers should apply vacation, sick or PTO time for employees unable to work due to COVID-19 circumstances and comply with ADA and FMLA requirements where applicable. Whether an employer must pay such employees depends upon the employer’s sick or medical leave policy and applicable federal, state and local laws and ordinances, which are often being updated to provide additional COVID-19 related restrictions and obligations, and should be consulted by employers. Note that some state and local laws may provide additional emergency paid or unpaid leave requirements (see our QuickStudies about recently-enacted laws in New York, New Jersey, California (for food sector workers),San Francisco, San Jose, and Los Angeles). For companies with unions, employers should check collective bargaining agreements and meet with unions to discuss protective measures. Employers may consider expanding paid time off benefits. Further, the Families First Coronavirus Response Act contains paid time off provisions, which, as of April 1, 2020, most employers with less than 500 employees will need to follow, with some exemptions for certain qualifying small businesses. These provisions are further discussed here. The CARES Act also may provide relief to those employees, as more fully discussed here.
Q-16. How should employers respond to employee requests not to work due to needing to be home to care for family members who are ill?
If the employee has had exposure to a family member who has been diagnosed with, or is experiencing symptoms of, COVID-19, the employer should consider requiring the employee to stay home for the time being (as further discussed below).
Note that because health care providers may be overwhelmed with patients, it may not be possible for employees to obtain timely medical releases clearing them to return to work. Employers should also be cognizant that employees requesting leave to care for an ill family member may qualify for up to 12 weeks of unpaid leave under the Family and Medical Leave Act (FMLA), to the extent they otherwise meet FMLA-eligibility requirements (i.e., have worked for their employer for at least 1,250 hours over the previous 12 months and at a location where at least 50 employees are employed by the employer within 75 miles). Many state or local laws (including, for example, New York, California, the District of Columbia, New Jersey, San Francisco, San Jose, Los Angeles, and Dallas) have enacted laws and ordinances requiring paid and/or unpaid leave for such care, some of which were enacted in the wake of COVID-19. Further, the FFCRA, which became effective on April 1, 2020, contains additional leave requirements applicable to most businesses with less than 500 employees. The firm has authored a QuickStudy explaining that legislation in some detail. If the requested leave does not trigger federal, state, or local leave requirements, the employer’s leave policies will provide guidance as to whether an employee is entitled to leave and, if so, whether it is paid leave. State and local laws or ordinances may describe additional limitations or obligations on employers, such as the scope and applicability of any protected or paid leave available to employees.
To the extent an employee is ineligible for paid leave under the FFCRA or state law, but is unable to work or telework due to the need to care for a child, he or she may be eligible for unemployment benefits under the CARES Act, discussed in more detail here.
Q-17. How should employers respond to employee requests not to work due to needing to be home with children not in school due to local school closures?
Some state and local laws, including those in New York, New Jersey, San Jose, San Francisco, and Los Angeles, require unpaid and/or paid leave for parents and guardians caring for a child during an unexpected school closure and/or a closure ordered by public officials (which is currently the case in several areas). Further, the FFCRA, which took effect on April 1, 2020, provides paid leave for eligible parents caring for their children due to ongoing school closures. The firm has authored a QuickStudy explaining those provisions. Covered employers must provide leave as required by the Act and as required by applicable state and/or local laws. State and local laws or ordinances may describe additional limitations or obligations on employers, such as the scope and applicability of any protected or paid leave available to employees. To the extent an employee is ineligible for paid leave under the FFCRA or state or local law, but is unable to work or telework due to the need to care for a child, they may be eligible for unemployment benefits under the new federal CARES Act, discussed in more detail here.
Q-18. What kind of documentation should employers require of employees (1) who request or take leave due to COVID-19 related reasons, and (2) before returning to work following such leave?
At the outset, an employer should retain appropriate documentation for employees who take leave under the FFCRA or otherwise, particularly if an employer wants to take advantage of the tax credits offered by the FFCRA. Per the DOL, a qualifying employee who wishes to take advantage of the paid sick leave or extended family and medical leave offered under the FFCRA must provide his/her employer with documentation to support such leave. An employer may also require an employee to provide documentation to support initial or extended family and medical leave taken to care for a child whose school or place of care is closed or otherwise unavailable for COVID-19 related reasons.
Regarding documentation before returning to work, according to the EEOC’s latest guidance, and in light of the COVID-19 pandemic, an employer may require a doctor’s note certifying an employee’s fitness for duty—such as following an employee’s self-quarantine and/or remote work arrangement due to COVID-19. As a practical matter, employers may choose to waive this requirement if the employee has been in quarantine and symptom-free for 14 or more days. It is worth noting that the CDC and EEOC advise against requiring employees with illnesses other than COVID-19 to validate their illness or ability to return to work in light of the overwhelming demands on medical providers (as well as the employee’s potential exposure to COVID-19 when visiting a medical provider’s office). Per the EEOC, employers should display flexibility to new certifications, such as reliance on local clinics and less formal documentation, such as a form, a stamp, or an e-mail to certify an individual is fit to return to work. State and local ordinances, may describe additional limitations or obligations on employers, such what (if any) documentation is permitted to initiate or to return from an employee’s leave of absence due to COVID-19 (see, for example, the Amended Dallas County Order here).
All notes or other certifying documents or medical information provided by an employee to an employer should be maintained as confidential and segregated from the employee’s personnel record.
Q-19. What notices or pay requirements apply if an employer needs to temporarily or permanently shut down some or all of its operations?
The federal Worker Adjustment and Retraining Notification (“WARN”) Act generally requires employers with 100 or more employees to provide 60 days’ notice of a mass layoff or plant closing. Notices are to be provided to employees, employees’ collective bargaining representative (as applicable), and to certain state and local officials.
- A mass layoff is a reduction in force at a single site of employment in which 50 or more employees comprising at least 33% of active employees or at least 500 employees are laid off for more than six months or have their hours reduced more than 50% during each month of the six-month period.
- A plant closing is the permanent or temporary shutdown of a single site of employment or facilities or operating units within a single site of employment that results in 50 or more employees being laid off for more than six months or having their hours reduced more than 50% during each month of the six-month period.
Exceptions to the 60-day notice requirement may exist for faltering companies (but only to plant closings) or for employers who experience unforeseeable business circumstances or natural disasters. If an employer believes any of these three exceptions may apply, the employer must provide as much notice as possible under the circumstances. Failure to provide any notice to affected employees will negate the exceptions.
Failure to provide 60 days’ notice, or as much notice as possible when relying on an exception, may result in back pay and benefit awards to employees and civil penalties.
Employers must also take into account state and local notice requirements (commonly known as “mini-WARN Acts”), some of which have notice requirements in addition to, or different from, the federal WARN Act.
Employers considering temporary or permanent layoffs must also consider any state-specific requirements related to payment of final wages, bonuses, commissions, and accrued but unused vacation time. The timing of these payments and what must be included in them or excluded from them varies from one state to another. For example, employers in California and Massachusetts must generally pay final wages to a terminated employee immediately upon termination, whereas an employer in Texas must generally pay final wages to a terminated employee no later than the sixth day after the date of termination.
Finally, employers with unionized workforces must also consult applicable collective bargaining agreements, which may require bargaining with unions over layoffs and/or the “effects” on bargaining unit employees. Collective bargaining agreements also may address potential layoff decisions, including the order in which the employer must lay off employees and whether employees may replace or “bump” their co-workers based on seniority.
Q-20. What should employers consider when reducing hours or salaries for employees?
To avoid drastic options like mass layoffs or plant closings, many employers may first want to consider other cost-saving measures, like reduced work hours, wage/salary reductions and furloughs. While these alternatives may help reduce labor costs significantly, they are not risk-free propositions.
For example, reducing employee’s work hours by more than 50% over the course of several months can trigger the notice requirements under the Worker Adjustment and Retraining Notification Act (see FAQ 19, above). The selection of employees for reduced schedules or other cost-saving measures also can create potential disparate treatment and/or disparate impact claims. Employers should use business-related selection criteria to reduce these risks.
Likewise, if not done appropriately, a furlough or reduced work schedule may jeopardize the exempt status of salaried exempt employees under the Fair Labor Standards Act (“FLSA”), which could then trigger minimum wage and overtime pay requirements. Employers should consider the following measures to reduce risk of non-compliance with the FLSA:
- Full-week shutdowns (of one or more weeks): This strategy avoids improper salary deductions and complies with the FLSA because employers must only pay exempt employees their salary for weeks during which they perform work. If an exempt employee performs no work during an entire workweek, the employee is not entitled to his or her salary for that week. Employers who implement this option must prohibit exempt employees from performing work and should consider eliminating an employee’s ability to work remotely (e.g., by eliminating email access or remote connectivity). If an employee nevertheless performs work, the employer must pay the corresponding salary but may discipline the employee for violating the no-work directive.
- Reduced workweek and reduced salary: A prospective reduced workweek coupled with a reduction in salary may avoid violations of the salary basis test under the FLSA, provided the salary reduction is a bona fide change reflecting long-term business needs. Before implementing any changes, employers should, at least one week in advance, if possible, notify affected employees in writing of the reduced workweek and salary plan.
Care must be taken to avoid salary reductions that are modified from time to time, as those may be misconstrued as being inconsistent with exempt status. The reduced salary cannot dip below the federal threshold for salaried employees ($684 per week or $35,568 per year) or below state standards that exceed the federal threshold. Otherwise, an exempt employee may become non-exempt. Employers should also keep in mind potential notice requirements under state or local law, including so-called Wage Theft Prevention Act (WTPA) notices, as well as potential issues regarding eligibility for health care coverage for employers utilizing an Affordable Care Act lookback measurement period method. A reduced workweek also may impact health care eligibility and other benefits coverage (see below).
- Reduced salary without a reduced workweek: Unless prevented by an agreement or state or local law, an employer is typically free to set salary/wage rates at any level (subject to minimum wage and salary requirements). A prospective reduction in employee salaries generally does not violate the FLSA if it is a bona fide change reflecting long-term business needs, and so long as it exceeds the minimum required salary level to meet the exemption test. In addition, the guidance above for reduced salary and reduced workweek also applies in this situation.
- Converting salaried employees to hourly and curtailing hours: Conversion to hourly status is helpful when the reduced salary of an exempt worker would fall below the federal or a state threshold for salaried exempt status or if an employer anticipates making repeated changes to compensation depending on business needs. This latter option, though, is mainly useful if the hours of the salaried exempt worker can be the subject of a rather stable weekly schedule and the employee records his/her hours on a daily basis and reports them weekly. One caveat: the employee must be instructed not to look at work emails outside of his or her hourly schedule; to avoid having additional “on call” at hours other than during the agreed upon schedule. And, of course, the considerations noted above, such as health care coverage and providing any WTPA notices, should be kept in mind.
Remember to check state and local laws, which are changing daily. Employers also must consider whether any state wage and hour laws limit their ability to impose a desired cost-saving measure.
The CARES Act also may provide financial assistance to eligible employers making efforts to keep their businesses running and their workers employed. In the alternative, employees who are furloughed, or whose worksites are temporarily or permanently shut down due to COVID-19 related reasons, may be eligible for unemployment benefits under the new federal CARES Act, discussed in more detail here.
Q-21. What do I need to know about employee benefits when reducing hours?
The impact on employee benefits is an often overlooked consideration. Employers should not forget to consider how changes in compensation and hours worked will impact employee benefit issues such as health care coverage and 401(k) plans.
Employers also need to consider the impact cost-saving measures may have on benefit eligibility, including whether they call for COBRA notices and whether they may be able, or need, to amend any benefit plans to address eligibility issues.
In that regard, employers should review the terms of governing plan documents to determine whether health coverage, for example, continues during a furlough period. In this regard, these key issues should be considered:
- Employers with insured plans need to review the terms of their underlying insurance contracts to determine whether a reduction in hours will result in a loss of health insurance coverage and at what point in time An employer may elect to change the manner it determines eligibility to participate in a group health plan, which could include providing coverage based on a lesser level of hours worked. To avoid penalties, an employer should consider the impact of any change of this type for purposes of the Affordable Care Act’s coverage mandates, such as the lookback measurement method for periods after the employer returns to business as usual.
- If a furlough or other reduced hours results in a loss of coverage, then it will be treated as a COBRA qualifying event. If so, the employer must provide the required COBRA notices and inform the impacted participants of their rights to continued coverage under the employer’s group health plan.
- COBRA coverage generally requires an employee to pay up to 102% of the full cost of coverage without any employer subsidy. An employer may, however, elect to subsidize some or all of the cost of continuation coverage during a furlough period. However, any such subsidy should be provided non-discriminatively so as to be provided on a tax-free basis to employees.
- For qualified plans like a 401(k) plan, employers also should consider whether layoffs or furloughs trigger vesting requirements and distributions to employees.
Q-22. If an employee is placed on unpaid leave or laid off due to a temporary or permanent worksite closure, is the employee eligible for unemployment compensation?
Eligibility for benefits related to loss of work based on any COVID-19 related issue will depend on each state’s eligibility criteria, but an employer may encourage its employees to apply for benefits and let state authorities make a determination. Additional information is available on various state agency’s websites (for example, that of the Texas Workforce Commission: https://twc. texas.gov/news/covid-19-resources-employers).
The federal government released new guidance due to COVID-19 that gives states flexibility to amend their laws to provide unemployment benefits in multiple scenarios related to COVID-19. For example, federal law now allows states to pay benefits where:
- An employer temporarily ceases operations due to COVID-19, thus preventing employees from coming to work.
- An individual is quarantined with the expectation of returning to work after the quarantine is over.
- An individual leaves employment due to a risk of exposure or infection or to care for a family member.
In addition, federal law does not require an employee to quit so that he/she can receive benefits due to the impact of COVID-19. The CARES Act also expanded the scope of unemployment benefits available to eligible employees. For more information regarding these additional benefits, see our Quick Study on the CARES Act.
Some states have also waived waiting periods and work search requirements for unemployment benefits sought in connection with COVID-19.
Q-23. What else should I keep in mind?
There are a host of other issues employers should take into account. Some of them are:
- Requiring use of vacation time: The FLSA does not address the use of vacation or paid time off, so employers generally are free to require use of paid time off in accordance with their policies or practices. However, some state laws impose restrictions on mandatory use of vacation or paid time off, so employers should consider such requirements before requiring use of vacation or paid time off as a cost-saving measure. Moreover, practically speaking, this option likely does not lead to immediate cost savings; employees are simply substituting paid time off for actual work.
- Sponsored foreign workers: Employers who sponsor foreign workers should also consider whether they must report furloughs or reductions in hours or compensation to the United States Citizenship and Immigration Services (“USCIS”) or Department of Labor (“DOL”). In some instances, employers cannot change the essential terms and conditions of a foreign worker’s employment without first notifying USCIS and/or the DOL.
- Unionized workforces: Employers with unionized workforces must also consider whether their collective bargaining agreements limit their ability to implement cost-saving measures and/or whether they must bargain with their union(s) over decisions to implement such measures or the impacts those actions have on unionized employees.
Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.