Solving the Pay Puzzle: Wage and Hour Issues During the Coronavirus Pandemic
Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.
The novel coronavirus continues to cause frustration for employers whose workforces are being impacted by the rapid spread of the virus, leading to a sharp increase in medical leave and disability accommodation requests, necessary employee layoffs, and a host of other legal issues. As businesses enter into the fray of personnel issues resulting from COVID-19, there are several steps that should be taken and issues that should be noted at the outset to place you in the best position to avoid unnecessary wage-and-hour liability.
First, it is imperative to review your company’s policies and handbooks to assess whether you are compliant with existing state and federal wage requirements, such as payment of overtime and minimum wage under the Fair Labor Standards Act (FLSA) and payment of earned wages upon termination pursuant to the Louisiana Wage Payment Act (LWPA). For hourly workers, even in times of national crisis, companies remain responsible for ensuring that employees are timely and adequately paid for their services, and this requires attention to timekeeping and payroll records to make sure that employees are paid overtime for hours worked over forty in a workweek and that any deductions from an employee’s wages do not place him or her below the federal minimum wage.
A major complication of maintaining wage-and-hour compliance during the coronavirus outbreak is the increased number of employees who are partially or entirely working from home. Most businesses have slowed operations to essential employees only or have closed their doors entirely, and this has caused a misperception of some owners that the company is only responsible for paying employees for the hours when they are demonstrably performing work from home. This may or may not be true based on the circumstances of the teleworking arrangement. For example, if an employee is required to remain on call or wait to receive assignments during certain times of the day and is not free to use that time for his or her own purposes, the employee is “engaged to wait” and must be compensated for such time. If an employee performs substantive work outside of normal business hours and the company is aware of this, the employee may be entitled to pay for this time that he or she is “suffered or permitted to work” under the FLSA. Likewise, if an employer is not vigilant in prohibiting employees from working while “off the clock,” it could lead to liability for failure to pay the employees for hours worked.
Also, in order to maintain an employee’s overtime-exempt status, whether based on the administrative, executive, learned professional, or other “white collar” exemption under the FLSA, an employer cannot reduce the employee’s salary below the minimum threshold for the exemption (currently $684 per week or $35,568 per year) if the employee is performing any amount of work during that pay period. That means that if a salaried employee is furloughed or on limited duty due to a coronavirus-related work shortage and his or her salary has been reduced below the federal minimum required for exempt status, then the employee loses the exemption if he performs any amount of compensable work, which could subject the company to liability for unpaid overtime and minimum wages.
Once a worker’s employment has been terminated, under the LWPA, the employer must pay all wages earned by the employee as of the date of separation, including accrued vacation pay, within fifteen days or by the next regular payday, whichever is earlier. Even if the employer claims to be owed certain amounts by the employee for equipment, uniforms, or other reimbursable expenses, it may only deduct from the employee’s final pay amounts that are not in dispute. If the employee denies it owes certain amounts to the employer, those amounts cannot be deducted from final pay without risking liability under state law. The monetary penalties for violations of the LWPA include payment of back wages, attorney’s fees, and penalty wages for up to ninety days at the employee’s regular rate of pay. These strict enforcement rules make it essential to timely remit final pay to employees in the event of a termination event, whether it involves a single employee or a mass layoff.
If your business relies on use of independent contractors, examine their relationships with the company to verify that they are not acting as employees, since this can lead to significant liability for failure to pay overtime and minimum wage and can even expose the business to costly class-action lawsuits if there are numerous contractors working in those positions. The key factors to consider in this assessment relate to the degree of control exercised by the company over the manner in which the contractors perform their services, such as whether the company sets the contractors’ schedules, pays them on a recurring daily, weekly or monthly basis rather than upon completion of work, or provides them with uniforms, vehicles, tools, materials, or other items to aid them in performing work.
Similarly, if your company has reduced its workforce and plans to utilize volunteers to perform any type of work for the company’s benefit, the FLSA requires, with very limited exceptions, that all nonexempt workers be paid at least minimum wage. Along those same lines, if you have interns on your staff who are performing work that is primarily for the benefit of the company rather than primarily for the interns’ own educational, vocational, or clinical benefit, then the interns are required to be paid at least minimum wage for such work.
Finally, while not directly related to wage-and-hour laws, the Department of Labor also administers the Family and Medical Leave Act (FMLA), which was recently expanded to include mandatory paid leave for employees whose children are out of school due to coronavirus and who are required to provide childcare as a result. The new Families First Coronavirus Response Act (FFCRA) went into effect on April 1 and requires companies, regardless of size, to pay covered workers (anyone who has been employed for at least thirty days) for up to twelve weeks at two-thirds of their regular rate of pay while on covered leave. The Act also provides for paid sick leave for other qualifying reasons, such as an employee with a medical diagnosis of COVID-19 or who is experiencing symptoms and seeking a diagnosis. There are several resources provided by the Department of Labor on its website (http://dol.gov/coronavirus) to aid employers in understanding the new law.
If your business is currently facing any of these complex wage-and-hour issues, scheduling a consultation with legal counsel may be the first step towards ensuring compliance with federal and state laws and maintaining proper payroll practices during this confusing and trying time.