Tough Decisions Employers Face In Times of Crisis

 

  1. Reducing Hours, Reducing Wages, and Layoffs

With few exceptions (such as a collective bargaining agreement with a union, employment contract with a key/executive employee), employees are considered “at will”. This means that either they or the employer can terminate the employment relationship at any time. In addition, it means that, in broad terms, the employer is able to vary the terms and conditions of a person’s employment including hours and pay rate. However, an employer must still comply with all wage and hour laws and notice requirements in doing so.

Key considerations:

  • Compliance with minimum wage. Even in times of national crisis, you are not permitted to pay below the hourly wage set by the government. In NYC, that rate is $15/hour and in Long Island it is $13/hour. You need to communicate the change in writing to your employees and its effective date. If you need to cut costs further, you must either reduce the number of hours worked by employee or reduce the number of employees.
  • No volunteers. In general, regulations do not permit an employer to ask employees to act as “volunteers” whether or not a national health crisis exists.
  • Compliance with wage laws. Exempt employees who work any portion of a workweek are entitled to their full pay. Hourly (non-exempt) employees are compensated only for the hours they work. 
  • Non-payment of exempt employees. The FLSA permits the non-payment of exempt employees only if they do not perform services during a work week. If they perform any services, they are entitled to their full salary. If you need to cut costs, you can consider a furlough in which you require exempt employees to take an unpaid week off from work (but considerations remain about minimum wage, and other guidelines). 
  • Reclassification of employees. If you had previously classified an employee as “exempt” and need to move them to “non-exempt”, you will need to (1) notify the employee of the change and its effective date; (2) communicate the regular hourly wage and the overtime hourly wage; (3) confirm benefits offered to this status position (if any) and (4) obtain their signed acknowledgement. Again, you must comply with minimum wage laws. 

For example, if you have an exempt employee at $100,000 per annum that you are reclassifying to non-exempt with a target pay of no more than $40,000 per year, assuming 1,920 hours worked per year (48 weeks at 40 hours per week), the new hourly rate is $20.83 with a cap at 40 hours per week. If the employee had previously worked 55 hours per week, the new hourly rate would be $13.33 – acceptable on Long Island, but not in NYC.

Once an employee is reclassified, s/he will need to track and report weekly hours and overtime will need to be paid for any week in which the employee performs more than 40 hours of services. As an employer, you need to be aware that requiring people to respond after business hours will incur additional hours being logged and required to be paid for. 

And, as an added complexity, when people are working remotely, it is difficult to monitor and limit hours spent on work. People will be feeling financial stress during this time, you don’t want to have a lawsuit later saying you failed to pay wages due during the period. Employers should institute an online hour tracking service, require check-ins and log-outs, in order to maintain accurate records and avoid lawsuits later.

Finally, a caution about reclassifying employees at this time. Be sure you have a legitimate reason in the reclassification otherwise you invite lawsuits once this has passed. Employees will remember how you treat them and will respond in kind.

  • Layoffs. If you have to layoff employees, be sure that you choose affected employees based on non-discriminatory reasons, such as type, quality or quantity of work, rather than prohibits reasons (e.g., age, race, religion, gender, sexuality, etc.). You should review your anticipated layoff listing with an eye toward disparate impact on older workers and other protected categories. 

If you are employer with more than 50 full-time employees in NYS, and you are (1) closing affecting 25 or more employees; (2) layoffs involving 25 or more employees, if those 25 employees are at least 1/3 of the employee at the location, or (3) laying off more than 250 employees, you are subject to NYS WARN act. The WARN act requires 90 days prior written notice to employees that the employee is losing his/her position. NYS has said that the WARN act is notautomatically suspended during the coronavirus pandemic. Instead, the DOL is stating that you must provide as much notice and information as possible to employees and the DOL as to the closing, so the DOL can determine if an exception applies to your situation. Flexibility is anticipated, but cannot be guaranteed.

And, if you do need to lay off employees, be sure to give them their last paycheck on a timely basis, and that there are sufficient funds to cover it.

  • Reducing Hours. In general, you can reduce hours available for employees to work without running afoul of regulations. Again, reductions should be made in a non-discriminatory fashion.
  1. Increasing paid sick time; workplace safety; requiring vacation time

Employers who are in a position to do so are increasing the number of paid sick days for their employees in light of the pandemic. Of course, you must be careful in providing these days in a non-discriminatory fashion. Further, with the guidance coming from various federal, state and local health departments, requirements for doctor’s notes should be eliminated at this time. Employers should not be sending more people into the health care system than absolutely necessary at this time.

It is advised that employers be very deliberate in how they approach workplace safety.

  • No temperature checks. Some employers have begun screening employees’ temperatures before admitting them to the office. It is not a recommended course of action. First, these forehead thermometers are not very accurate and second, there are other reasons someone may have a temperature. As an employer, you do not want to know an employee’s private health information (if at all possible and avoidable) and you don’t want to seek it out.
  • Workplace cleanliness. OSHA has released guidelines for business owners on workplace safety in light of COVID-19. Those are attached for reference.

If you offer vacation time to your employees, there is no prohibition on an employer requiring that accrued vacation be taken on specific days. However, you cannot substitute vacation days for sick days if an exempt employee performs any work during the week.

  1. Remote Work; Different Work

With state mandated reductions in people allowed to be in offices, more and more employers are looking to remote work to keep their business moving. Again, in general, an employer is free to mandate remote work (provided, again, it is done so in a nondiscriminatory manner), but there are considerations that need to be addressed.

  • Cost of Connection. Non-exempt employees must always receive the minimum wage free and clear. Thus, if you pay someone the minimum wage and it costs them money to provide a computer, internet connection, etc. to work, you are violating labor standards. You must reimburse reasonable costs to access remote work.
  • Different Work. In general, you can have employees perform services (remotely or in-person as permitted by health and government officials at this time) even if they are outside of their job descriptions provided that the person is not subject to a collective bargaining agreement or other employment contract and is not a minor.
  • Cybersecurity & Confidentiality. You should review with your employees cybersecurity guidelines that help prevent data loss while they are remote. They should also be instructed in confidentiality issues while working from home.

Francine E. Love is the Founder & Managing Attorney at LOVE LAW FIRM, PLLC which dedicates its practice to serving businesses and entrepreneurs. The opinions expressed are those of the author. This article is for general information purposes and is not intended to be and should not be taken as legal advice. To learn more about LOVE LAW FIRM please see our website, www.lovelawfirmpllc.com. Email us  [email protected] or call us at 516.697.4828 to learn more.

 

Francine E. Love
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Founder and Managing Attorney at Love Law Firm, PLLC which dedicates its practice to New York business law