Is This an "Emergency"?
Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.
Many businesses have been in an “all hands on deck” mode for several weeks now, with no real end in sight. Employees are being asked to do whatever is necessary to keep our businesses running. Some workers are being asked to perform duties outside the usual scope of their jobs and financial constraints are forcing some of us to change the way that we compensate our employees. Neither of these things poses a real problem when dealing with a non-exempt employee. However, if we require an exempt employee to perform “non-exempt” duties or if we significantly reduce or change the manner in which we pay an exempt employee, we run the risk of losing the exemption for that employee.
Emergency Exemption to Duties
A little-known and seldom-used FLSA provision can provide us with some relief. The FLSA Federal Regulations provide that an exempt employee may not lose her exempt status by performing work of a non-exempt nature because of an emergency. The regulations generally define an “emergency” as circumstances beyond an employer’s control for which they cannot reasonably provide in the normal course of business. Emergencies are conditions that employers cannot realistically anticipate which occur rarely. Classic examples that do not qualify as emergencies include heavy work periods, rush orders, and times during which necessary equipment needs routine repair.
The COVID-19 pandemic has many of the signs of an “emergency” under the FLSA: it is beyond employers’ control; it is unanticipated and employers could not reasonably provide for it in the normal course of business. However, as far as we know, no regulatory agency or court has yet to address this issue.
Unfortunately, the regulatory exception mentioned above applies only to the performance of non-exempt duties; it does not make any exception to the requirement that almost all exempt employees must be paid at least $684 a week on a salary basis. (Very few positions can be paid by the hour and still be exempt: primarily doctors, lawyers, teachers and computer workers.) If you reduce the salary of an exempt employee below $684 a week, you will probably lose the exemption. Similarly, if you stop compensating an exempt employee on a salary basis, you will probably lose the exemption for that employee. (I say probably because the FLSA is rife with exceptions.)
Keep in mind that an employee has up to three years to assert a claim under the FLSA. To make matters worse, the FLSA often allows a prevailing plaintiff to recover 100% of her actual damages as a penalty. Bottom line, the mere fact that an employee seems to be fine with a change to her job duties and/or compensation right now does not mean that she cannot sue you several years down the road: an employee cannot agree to a violation of the FLSA.
Bottom line: Run the traps before you change your employees’ compensation and duties. If you are concerned that you may lose the exemption for a particular employee, the most logical choice may be to convert them to non-exempt.