The COVID-19 pandemic has quickly led to stay-at-home directives, enhanced health and safety requirements, and new legislation. These developments changed the working environment and the rules governing the employment relationship seemingly overnight. As the result of the economic slowdown and stay-at-home orders, many businesses are having to consider various cost-cutting measures that impact their workforce, including furloughs, pay cuts, and reductions in force. Employers will face additional challenges as they plan for employees' return to work in the office and the resumption of more normal business operations over time. We call attention to five areas of potential risk for employers to carefully consider:
- The legal implications of various cost-cutting measures.
As businesses pause or contract their operations, they should fully vet the many considerations that go along with the various options for lowering their payroll obligations, including federal and state WARN Act triggers, wage and hour law requirements, the impact on employees' ability to continue participating in benefit plans and vesting in equity, and contractual obligations. Employers need to be cognizant of whether layoffs, furloughs, and reductions in pay trigger a notification obligation under federal or state WARN Acts, the rules surrounding the use of PTO and certain leave entitlements, and the standards for maintaining exempt status, among other concerns. Employers also should consider whether any tax-relief or loans may be available under the newly enacted CARES Act that might permit them to avoid implementing cost-cutting measures in the short-term. The relevant tax-relief and loan programs are summarized in Wilson Sonsini's tax relief alert and our firm's loan programs alert, respectively.
- Compliance with new leave legislation.
Many employees have new entitlements to paid sick and family medical leave under the Families First Coronavirus Response Act (FFCRA) and other new legislation at the state level, which need to be understood and applied within the framework of existing leave laws and entitlements. Businesses need to ensure that their policies reflect, and are consistent with, the new leave entitlements, including informing employees of the new reasons for which leave may be available. They also need to ensure compliance with new posting, recordkeeping, and notice requirements. For example, the FFCRA requires employees requesting leave to provide their employers with documentation of a qualified reason for leave. Employers must retain all such documentation (as well as the employers' documentation of oral requests) for four years, regardless of whether leave is granted or denied. Additionally, confidential health information provided by employees when requesting leave (e.g., information about their COVID-19 symptoms) may qualify as a confidential medical record that the employer must safeguard pursuant to the specific requirements of the Americans with Disabilities Act.
- Protection of confidential information.
Most employees are now working from home, and many will continue to do so for some time. As a result, employees are handling and working with their employers' confidential and proprietary information out of their homes and perhaps even using their personal devices to do so. Employers must review their confidentiality agreements and policies to ensure they address these situations, including providing the employer with a right to audit any electronic device that is used for a business purpose. Employers also should consider how to address the practical challenges associated with conducting an audit of employee personal devices and ensuring the return of company equipment, devices, and confidential information when employees return to the office.
- Compliance with wage and hour laws.
With many non-exempt employees also working from home, employers now have limited visibility into the hours they work. Without taking appropriate steps on the front end to limit and record the hours worked, employers may have no way to dispute overtime claims and alleged violations of wage and hour laws, which are likely to be presented on a class-wide basis. It also is prudent for employers to audit their employee classifications to mitigate the risk that employees, who may be working long hours at home, have been misclassified as exempt or have lost their exempt status because of a reduction in their salaries or otherwise.
- Employers' legal obligations when resuming operations.
Businesses are starting to plan for resumption of business operations, including returning employees to the office or other physical worksites and engaging in business-related travel. Employers will need to continue being mindful of their general duty to provide a safe workplace. This includes reviewing and updating policies on travel, telecommuting, social distancing, and other issues, determining a permissible screening protocol to identify and keep sick employees out of the workplace (potentially including regular temperature readings), and taking appropriate safety measures, which may include staggering employees' return to or attendance in the office, and providing employees with personal protective equipment. Employers also should be prepared to address situations where employees are reluctant to or refuse to return to the office or engage in certain work-related activities.
