We realize employers continue to have pressing questions during this growing COVID-19 pandemic. Our COVID-19 Task Force is ready to assist with those questions and will continue providing updates in hopes of answering some of the more pressing questions you are likely to encounter as we move forward in this unprecedented situation.
BUSINESS DISRUPTIONS AND PAY OBLIGATIONS
Many businesses are facing challenges stemming from reduced business as individuals follow the CDC’s suggestions relating to social distancing and staying at home when possible. If businesses are required to reduce work hours for employees in relation to the COVID-19 outbreak, the issue of whether or not the employee will need to be paid depends on several factors, including the employee's job classification.
Salaried, Exempt Employees
For salaried, exempt employees,
employers generally are required to pay the employee his/her full salary for the workweek if he/she works any part of the workweek. If an exempt employee is performing any work either in person or from a mobile location (even if just working for part of a workday or part of a workweek), he/she must be paid the full amount that would be due to him/her if he/she worked the full workweek.
On the other hand, if a salaried, exempt employee does not work any time at all during the workweek, arguably the employer would not need to pay the employee. However, the issue of whether or not an exempt employee has worked at any time during the workweek may be difficult for an employer to monitor if the employee has the ability to work from home and/or otherwise has the ability to respond to emails or telephone calls/messages received during the workweek. Accordingly, if there is any doubt as to whether or not the employee has worked at any time during the workweek, the best and recommended course of action is to continue paying the employee his/her regular salary. Moreover, so long as an exempt employee is ready, willing and able to work, you cannot deduct money for slow times when there is little or no work assigned.
If an exempt employee is sick during the coronavirus outbreak, the general rule is that the employee should be paid. However, employers may make deductions for a full day's absence due to illness if the employer has a bona fide plan, policy, or practice that provides compensation for loss of salary as a result of sickness or disability.
One concern with reduced staffing is that an exempt employee may be asked to perform job duties outside of the scope of his/her regular job duties. The worry here is that employee still has to predominantly perform duties that would classify the employee as an exempt under the Fair Labor Standards Act (the main categories are executive, professional, administrative, highly compensated, computer, and outside sales). If an employee's job duties change to the point that the employee is predominately performing non-exempt work, the employer will be responsible for paying one and one-half times the employee’s normal pay rate for overtime worked during the workweek.
If an employer is faced with a long-term business or economic slowdown, the employer may make a prospective reduction in pay for a salaried, exempt employee so long as the employee still receives at least $684 per week. Critically, this reduction has to reflect long-term business needs rather than a short-term salary deduction or a week-by-week change based on work performed (that would be considered as evading the purpose of the exemption). Moreover, most state wage payment and collection laws (including West Virginia, North Carolina, Pennsylvania, and Virginia) require employers to provide employees with reasonable advance notice for any change in the employee’s pay rate or salary. Additionally, if cuts are required, it is safest to make the same cut for all employees in the same, particular job class so there is no reason for an employee to claim he/she was treated differently based upon a protected characteristic, such as disability, race, sex, etc.
Hourly, Non-Exempt Employees
For hourly, non-exempt employees,
employers are required to pay only for hours actually worked and regardless of whether the employee had previously been scheduled to work additional time. All non-exempt employees must be paid at least the applicable federal minimum wage for all hours worked. In a week in which the employee worked overtime, he/she must be paid his/her regular rate of pay and overtime pay at a rate not less than one and one-half times the regular rate of pay for all overtime hours.
Employers are not precluded from lowering a non-exempt employee's hourly rate, provided the rate paid is at least minimum wage. Likewise employers are not precluded from reducing the number of hours the employee is scheduled to work.
As with exempt employees, most state wage payment and collection laws (including West Virginia, North Carolina, Pennsylvania, and Virginia) require employers to provide employees with reasonable advance notice for any change in the employee's pay rate or salary.
Employers need to continue to follow any paid leave policies currently in place. Moreover, if the non-exempt employee is sick for medical reasons relating to COVID-19, the Families First Coronavirus Response Act requires most employers with fewer than 500 employees to provide the employee, as of April 2, 2020, with up to two weeks of additional paid leave, paid at the employee's regular rate.
BENEFIT ISSUES IF HOURS REDUCED
A reduction in an employee's work hours also could result in a loss of eligibility for healthcare benefits depending upon whether the employee still remains in the eligible classification for coverage under the terms of the company's insurance policy. If an employee no longer fits within the eligible classification for coverage, he/she would need to be notified of his/her eligibility for continuation of coverage through COBRA.
The Workers Adjustment and Retraining Notification Act (“WARN Act”) applies to employers with:
- 100 or more full-time employees (not counting employees who have worked for the employer less than six months in the past 12 months or employees who work, on average, less than 20 hours per week); or
- 100 or more workers who work at least a combined 4,000 hours per week, exclusive of overtime.
The WARN Act applies when a covered employer is:
- Closing a facility or discontinuing an operating unit permanently or temporarily that affects 50 or more employees;
- Lays off 500 or more workers at a single site of employment during a 30-day period or lays off 50-499 workers and these layoffs constitute 33 percent of the employer’s total active workforce; or
- Reduces the hours of work for 50 or more workers by 50 percent or more for each month in any 6-month period.
Please note the WARN Act looks at the employment losses that occur over a 90-day period so the WARN Act would apply if the employer has a series of small terminations or layoffs that add up to the numbers referenced above. The WARN Act requires a covered employer to provide at least 60 calendar days advance written notice of layoff. There are three exceptions to the full 60-day notice requirement:
- Faltering company;
- Unforeseeable business circumstances; or
- Natural disaster.
Generally, a WARN Notice is not required for a temporary layoff that is expected to be less than six months. However, if the employer later determines the 6 month period is going to be extended for reasons that were not reasonably foreseeable at the time the layoff was originally announced, notice would need to be given when the need for the extension becomes known.
An employer who fails to provide notice as required by WARN is liable to each affected employee for an amount equal to back pay and benefits for the period of violation, up to 60 days, and is also subject to civil penalties for each day of violation.
The information provided above is just a general summary of WARN and its major provisions. If your business is in a situation where WARN might be applicable, we recommend consulting an attorney to discuss your business' specific situation and what your business is required to do to fulfill its obligations under the WARN Act.
What if we have employment contracts?
For employers who have employees with employment contracts, it’s important to consult the terms of these contracts before making decisions about these employees’ terms and conditions of employment going forward. Some contracts may contain a definition of a disability and address how conditions of employment may or may not change if the employee develops a disability or becomes a direct threat to the workforce. Note the EEOC has now issued guidance stating that having someone with COVID-19, or symptoms of it, currently meets the direct threat standard. Additionally, employment contracts with a term of employment may include automatic renewal clauses. It is important to stay aware of the specific terms of these automatic renewal clauses, and the timeframe in which notice of termination of the contract is required, if the employer anticipates it may not have enough work for the individual going forward. Employers should closely inspect the terms of employment contracts when deciding whether and how to alter terms and conditions of employment.
Can employees receive unemployment compensation?
According to guidance issued by the Department of Labor, states may amend their unemployment insurance laws to provide unemployment compensation benefits when:
- An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work;
- An individual is quarantined with the expectation of returning to work after the quarantine is over; and
- An individual leaves employment due to a risk of exposure or infection or to care for a family member.
An employee does not have to quit his or her employment in order to receive unemployment compensation due to the effects of COVID-19. However, an individual who is receiving paid sick leave or paid family leave is still receiving pay and is therefore ineligible for unemployment compensation.
States must decide individually whether those experiencing any of the scenarios described above will be eligible for unemployment compensation. On March 19, West Virginia Governor Jim Justice issued an executive order directing the West Virginia Department of Commerce and WorkForce West Virginia to provide unemployment benefits to those affected by COVID-19 to the maximum extent permitted under federal law. Pennsylvania’s Office of Unemployment Compensation website lists scenarios in which individuals may be eligible for unemployment compensation due to COVID-19, as do Virginia’s and North Carolina’s unemployment compensation websites.
If you have any questions or need assistance, please contact our COVID-19 Task Force and Labor & Employment Practice Group.