COVID-19: Employment Squalls Likely to Hit Employers

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Snell & WilmerMany employers have opened for business and now hope for much-needed smooth sailing. As they chart their course for open and calm waters, however, employers would be well-served to keep their spyglasses focused on the horizon’s rough seas.   

1. Families First Coronavirus Response Act Leave Liabilities

The Families First Coronavirus Response Act (“FFCRA”) creates two forms of federal COVID-19 leave that come with stringent employee protections, rendering them potential bases for employee-initiated claims. Significantly, these protections continue through the end of 2020. Although employees are returning to work, leave under the FFCRA remains available to employees throughout this calendar year. 

The FFCRA provides certain employees of covered private employers access to expanded FMLA leave under the Emergency Family Medical Leave Expansion Act (“EFMLEA”) and paid sick time through the Emergency Paid Sick Leave Act (“EPSLA”). These leaves do not replace, but rather supplement, leave rights afforded under state law and employers' existing policies and practices.

The EFMLEA amends the Family and Medical Leave Act (“FMLA”) and provides an additional basis on which an eligible employee may take FMLA leave, i.e., to care for a son or daughter whose school or caregiver is closed or unavailable due to COVID-19. One key difference between traditional FMLA and the EFMLEA is that up to 10 weeks of EFMLEA are paid. Notably, the FMLA contains anti-retaliation and anti-interference provisions that apply to the EFMLEA.

EPSLA creates a new bank of leave requiring – with limited exceptions – covered employers to provide full-time employees with 80 hours of paid sick time and part-time employees with a number of paid sick time hours equal to the average number of hours they worked over a two-week period. The EPSLA also includes anti-retaliation provisions protecting employees against discharge, discipline or any form of discrimination for (1) taking EPSLA leave or (2) filing any complaint, instituting a proceeding, or causing a proceeding to be instituted, in each case relating to EPSLA, or testifying or preparing to testify in any such proceeding.  Furthermore, the EPSLA provides that an employer’s violation of EPSLA will be treated as a failure to pay minimum wages in violation of the Fair Labor Standards Act of 1938, enabling employees to recover liquidated damages and attorneys’ fees for violations.

The FFCRA also imposes a host of other requirements upon employers, such as posting notices, tracking qualified leaves and maintaining employee confidentiality. A good overview of some of the key provisions can be found here.

Employers should consider reviewing employees’ time off from April 1, 2020 (the effective date of the FFCRA) forward and evaluate the reasons for leave, whether such leave falls within FFCRA, and make any needed course corrections.

2. Increase in Safety-Related Actions

The initial cannons of safety-related actions because of COVID-19 have been fired by the federal government, employees and third parties, and employers should likely brace for more.  There are three potential sources of safety-related liability for employers due to COVID-19: The Occupational Safety and Health Administration (“OSHA”), employees (and former employees) and third-parties, such as customers, vendors and family members.

The general duty clause of the Occupational Safety and Health Act (“Act”) requires employers to ensure their workplace is “free from recognized hazards that are causing or likely to cause death or serious physical harm.” COVID-19 is a recognized hazard in the workplace, so employers who fail to implement appropriate preventative measures will likely face enforcement actions by OSHA.  Notably, although employees cannot generally sue their employers for unsafe working conditions under the Act (though there is an exception under California’s Private Attorney General Act), the potential fines for citations can be substantial.  And while OSHA has slowly published guidance for specific industries, thus far it has resisted pleas from workers’ advocates to require specific safety measures and instead has largely urged employers to follow the Centers for Disease Control and Prevention’s COVID-19 recommendations.

Additionally, employees are a source of potential legal action. Employees have already alleged constructive termination due to a lack of proper safety precautions. Employees who contract COVID-19 on the job can also file workers’ compensation claims and multiple states have implemented orders or are considering legislation to create a presumption for some employees that COVID-19 was contracted by work. In some states like California, workers may also attempt to bring state lawsuits if they contract the virus despite the fact that such lawsuits would typically be precluded by workers’ compensation exclusivity.

Finally, employers should also prepare for third-party lawsuits in cases where a non-employee contracts COVID-19 due to the actions of an employer.  For example, if a customer or client contracts the virus from a company’s employee, it’s possible the third party may file a personal injury claim against the employer. 

Congress is considering legislation to limit employer liability related to COVID-19, but it’s not clear those efforts have the necessary bipartisan support. Even if passed, exceptions for companies accused of gross negligence, recklessness or willful misconduct may swallow the rule – similar to the Kraken (the giant sea monster in the Pirates of the Caribbean film series) that swallowed the Black Pearl and Jack Sparrow and dragged to the depths of the sea.

3. Wage and Hour-Related Claims

Almost overnight, many employees switched to remote work arrangements – some with employers who failed to chart any course and who may now find themselves sailing the seven seas looking for a safe harbor. Indeed, employers are bound to see an increase in claims relating to failure to pay for all time worked, including overtime, failure to provide meal and rest breaks, and failure to reimburse necessary business expenses. These types of claims, which are often brought on a class-wide basis and can trigger various penalties, can be particularly costly for employers.

Under the Fair Labor Standards Act (“FLSA”) and state law, employers are required to pay at least minimum wage for all hours worked and overtime for all hours worked over 40 hours in one week. Additionally, some states, such as California, require employers to pay overtime if employees work beyond a certain number of hours in a day and require employers provide employees with meal and rest breaks during the day. In normal work environments, employers have developed good tools and procedures to ensure employees record their time worked, take all their required breaks and do not work beyond their scheduled shifts. Some employees may have never worked from home and many employers will not have had procedures in place for employees to record their time worked remotely. Additionally, there often are fewer controls and management oversight when employees start and stop working and over whether they take their required breaks. This could lead to an uptick in wage claims by employees that they were working “off-the-clock” and were not provided their required meal and rest breaks.

Additionally, the nearly overnight conversion to remote workforces likely caused many employees to purchase equipment and supplies, such as laptops, printers, scanners and other standard office supplies, to facilitate working from home. Similarly, many employees who may have previously been prohibited from using their personal cell phones, computers or internet for business purposes will have been required to use such equipment. The FLSA requires companies to reimburse workers for expenses when such expenses would cause the employee’s pay to fall below minimum wage. Further, in some states, such as California, the law is more generous, requiring employers to reimburse employees for all necessary business expenses, including the cost of using personal cell phones for business purposes even where employees have unlimited cell phone plans.

Further, as employees begin transitioning back to work at the employer’s business location, employees are often being required to undergo certain wellness checks, such as temperature checks and filling out wellness surveys. Non-exempt employees who are not paid for the time completing these tasks could allege that there has been a failure to pay for such time “worked.” While federal law is unclear as applied to this particular instance and whether such time must be compensated, such hazy skies can result in expensive litigation and require employers to tack and jibe in order to stay afloat.

4. Anticipated Challenges to Current Layoffs and Furloughs

As a result of the COVID-19 pandemic, more than 36 million U.S. workers have sought unemployment benefits due to being laid off or furloughed. Some of these personnel actions will likely be legally challenged. 

Claims of discrimination are anticipated to be one type of challenge. Every single laid-off worker falls into several protected groups and, therefore, can bring claims of discrimination. For example, workers who are laid off or furloughed may claim they were targeted due to their age (if 40 or older), gender, gender identity, sexual orientation, race, color, religion, national origin, disability, genetic information, military service and several other protected class statuses.

If an employer makes a business decision to lay off/furlough all of its workers at a particular location or in a particular job classification or associated with a particular product or service, the chances that claims of discrimination will be successful are low.  However, if an employer lays off/furloughs some, but not all, workers at a location, in a job classification, etc., discrimination claims can be brought, challenging the selection criteria used in deciding who was and was not selected. Generally, the more objective the criteria used, for example, “last in / first out,” the less exposure there is to claims of discrimination; and the more subjective the criteria used, the greater the exposure to claims of discrimination. At a minimum, employers should consider creating a written evidentiary record of the non-discriminatory, business-related criteria used to make such layoff/furlough decisions. 

An employer may also want to consider conducting some form of adverse impact analysis prior to finalizing the layoff decisions.  If members of a particular protected group, for example, workers 40 years of age and over, are selected for layoff in greater percentages than their representation in the relevant work force, the employer may want to reexamine its selection process. 

A second area ripe for legal challenge is the amount of notice given to laid-off workers prior to the effective date of their layoffs.  At the federal level, the Workers Adjustment and Retraining Notice (“WARN”) Act requires employers with 100 or more employees to provide at least 60 days’ written notice of layoff prior to the effective date of the layoff, if the requisite number of employees at a site of employment are laid off, and in some instances if employees are furloughed.  Legal challenges to the notice period provided are almost always brought as class actions.  The WARN Act provides for an exception to its notice requirements in the event of “unforeseeable circumstances.”  It is anticipated that the current absence of layoff notices will be legally challenged and that employers will assert the “unforeseen circumstances” defense. The outcome of such legal challenges is uncertain.

Several states have their own layoff notice requirements that differ from the federal WARN requirements and notably do not include certain of the federal defenses.

Finally, one of the best “safety nets” to protect employers from legal liability as a result of mass layoffs is the use of Release Agreements in exchange for the receipt of severance benefits.  With only a few exceptions, virtually all employment-related potential legal claims can be waived through the signing of a properly prepared Release Agreement.  There is another federal law, the Older Worker Benefit Protection Act (“OWBPA”) that regulates the use and content of Release Agreements in order for them to be fully enforceable.  Here again, several states have similar state laws regulating the use of Release Agreements. 

The current unprecedented business environment will no doubt result in a number of unprecedented legal developments in the employment area.  Sadly, the areas noted above are only a few.  Employers may want to consider consulting experienced employment counsel to help navigate to sunny skies rather than merely battening down the hatches and trying to weather the storm alone.  Savvy?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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