LEGAL PITFALLS FOR EMPLOYERS TO AVOID DURING CORONAVIRUS PANDEMIC
The coronavirus pandemic (“COVID-19”) has dramatically impacted every aspect of life throughout the world. The impact has been particularly profound in the area of employment. U.S. employers of all sizes have been forced to reassess every aspect of their operations and implement a wide array of preventative measures to minimize the risk of COVID-19 exposure among their staff. Employers must also be extremely vigilant in keeping up with the daily and sometimes hourly directives from federal, state, and local officials which impact their legal obligations.
It is impossible to summarize all of the legal implications of COVID-19 upon employers, so management and human resources personnel are strongly urged to educate themselves on the latest governmental guidelines which are readily accessible throughout the internet and social media. However, to assist employers in assuring compliance with state and federal laws which may apply during the pandemic, below are some common legal pitfalls faced by employers in these challenging times.
*Failure to compensate non-exempt employees for all hours worked
Employers must still strictly comply with the provisions of the Fair Labor Standards Act (“FLSA”) during the COVID-19 crisis. Non-exempt employees working remotely must be compensated for all hours worked. Compensable hours generally include on-call time, time spent communicating via e-mail or text unless it is de minimis, and any other hours incurred for the benefit of the employer. Monetary penalties for failure to comply with the FLSA can be severe. Thorough recordkeeping of hours worked by non-exempt employees is essential.
*Failure to compensate exempt employees on a salary basis
Subject to some narrow exceptions, exempt salaried employees must be paid their regular salary for each week or part of a week in which they work under FLSA guidelines. Therefore, employers who have scheduled exempt employees to work on a rotating basis, either at the office or remotely, must still pay the employees’ full weekly salary even if they do not work the entire week. In addition, if employees’ job duties have been restructured in response to the pandemic, management should reassess whether they are properly classified as exempt or non-exempt.
*Lack of compliance with the leave provisions of the Families First Coronavirus Response Act
On March 18, 2020, the Families First Coronavirus Response Act (“FFCRA”) was signed into law. It is effective from April 2, 2020 until December 31, 2020 and generally applies to employers with under 500 employees. The paid family leave component of the FFCRA allows employees to take up to 12 weeks of job-protected leave due to the closure of their minor son or daughter’s school or child care service. The first 10 days of such leave can be unpaid, but the employee may substitute paid sick, vacation, or personal leave during this time. The employer may not require such a substitution. For the remaining 10 weeks, eligible employees must be paid two-thirds of their regular pay, capped at $200 per day and $10,000 total. The paid family leave is available to any employee on the payroll at least 30 days.
The sick leave component of the FFCRA requires employers to pay up to 80 hours of paid sick leave to eligible employees who are in isolation or quarantine due to COVID-19, have symptoms of COVID-19 and are seeking a medical diagnosis, are caring for someone in isolation or quarantine, and other COVID-19 related situations. Depending on the reason for the leave, employees must be compensated at either two-thirds or 100% of their regular pay. Paid leave is limited to $511 per day and $5,110 total for an employee’s own care and $200 per day and $2,000 total when caring for someone else. Paid sick leave under the FFCRA is available regardless of the length of service of the employee.
Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA.
The FFCRA contains many other detailed requirements and guidelines for employers which must be followed. Its coverage is broader than the FMLA, which is limited to employers with at least 50 employees and covers only employees who have been employed for at least one year and worked at least 1,250 hours.
*Improper classification of employees as independent contractors
Due to the economic burdens of the COVID-19 crisis, employers may consider shifting W-2 employees to independent contractor status to minimize costs. However, state and federal guidelines for such classifications still apply. Where the employer continues to control the mode and manner of the individual’s work and meets other indicia of an employer-employee relationship, the employer may be in violation of the FLSA and comparable state wage-and-hour laws. In addition, employers who misclassify a large number of workers are at increased risk of class or collective action lawsuits which can be economically crippling. Therefore, employers must perform a careful analysis of any change in employee classification in consultation with experienced legal counsel to avoid potential liability risk.
*Increased liability exposure due to insufficient insurance coverage for drivers
With the restrictions on bars and restaurants with respect to sit-down service, employers in these industries may attempt to switch servers and kitchen workers to delivery drivers. Such a switch raises a whole host of legal and insurance issues. For example, most personal automobile insurance policies have exclusions for drivers performing commercial delivery services, thus creating significant liability risk to employers. In addition, employers who fail to thoroughly investigate the driving history of their employees or independent contractors face additional legal scrutiny in the event of on-the-job accidents. Given the increased demand for delivery services in light of social distancing efforts, the risk of accidents involving delivery personnel increases substantially. Accordingly, advance consultation with legal counsel and insurance representatives is essential for companies offering delivery service on a permanent or temporary basis.
*Increased risk of discrimination or retaliation claims by disparate treatment of employees based on protected classifications
The COVID-19 pandemic has forced employers to modify the job duties, schedules, and number of hours of their workforce. Difficult decisions regarding temporary or permanent layoffs, reductions in hours, and modification of duties are unavoidable. Generally, employers will base such decisions on governmental orders, social distancing considerations, and economic necessities. However, employers must be very careful to avoid decisions based on classes of employees who are protected under state and federal anti-discrimination and anti-retaliation statutes. Decisions which negatively impact a class of protected individuals based on race, sex, religion, disability, national origin, sexual orientation, genetic information, and other protected categories must be carefully scrutinized by HR personnel and outside legal counsel.
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Employers are urged to promptly consult with their legal counsel to audit their current practices for compliance with the ever-changing legal landscape resulting from the COVID-19 pandemic. Given the profound economic impact of this pandemic on the workplace, employers can ill afford the additional costs of liability exposure, attorney’s fees, and litigation expenses which may result from the pitfalls outlined above.
Anthony J. Caruso, Esq. is a partner at Kohnen & Patton LLP specializing in employment law. For more information regarding legal compliance during the COVID-19 pandemic, contact Mr. Caruso at 513-381-0656 or tcaruso@kplaw.com.