Navigating the Coronavirus: Don’t forget about the FLSA
Unless you are completely disconnected from television or the internet, you cannot go an hour without hearing or reading a news story about COVID-19, commonly referred to as the Coronavirus. Much of the coverage centers on precautions public and private entities are taking to stem the spread of the virus. For example, Italy has instituted a nationwide lockdown that severely restricts a person’s ability to travel (both abroad and in-country). China has quarantined 11 million residents in Wuhan. Israel is requiring travelers to be quarantined for 14 days upon entering the country.
Even within the United States, we are starting to see responses to address the situation. Many of these responses directly address or impact the workplace. For instance, San Francisco has advised people to stay away from large crowds, to stay home from work if they are sick, and take other strict precautions to prevent spread of the virus. At least one county in California has advised employers to suspend nonessential travel for employees. The Center for Disease Control and Prevention (CDC) has issued “interim guidance” for employers in light of the rising concern surrounding COVID-19. The guidance recommends that employees experiencing symptoms of acute respiratory illness should stay home from work.
Of course, an employer’s primary concern should be to ensure the safety and health of its employees. This includes educating employees about COVID-19, as there is a lot of misinformation out there (newsflash: not everything on the internet is accurate), and providing guidance on when a person should refrain from coming to work. In the midst of all of this, employers should be mindful that they do not accidentally violate the Fair Labor Standards Act (FLSA) in addressing workplace absences due to health-related concerns. Below are answers to common questions employers are asking regarding how they should compensate employees for absences related to COVID-19.
Question 1: Does my company have to compensate non-exempt employees for absences due to COVID-19?
The phrase “due to COVID-19” encompasses a lot of scenarios, including an employee who has tested positive for the virus or an employee who is following the CDC’s advice to stay home because she is experiencing symptoms of acute respiratory illness. It can also encompass the scenario in which an employee misses work because the employer has temporarily suspended operations or reduced employees’ hours due to health concerns or market conditions negatively impacted by COVID-19. Regardless, the legal analysis for non-exempt employees (sometimes referred to as “hourly employees”) is fairly straightforward.
The FLSA only requires employers to compensate non-exempt employees for time actually worked. As an example, let’s assume a non-exempt employee is regularly scheduled to work eight hours per day, Monday through Friday. On Monday, the employee works only four hours and then takes the rest of the week off because she develops symptoms of acute respiratory illness. Because the employee is non-exempt, the employer only has to pay the employee for the four hours she actually worked in order to be compliant with the FLSA.
Question 2: Due to international restrictions related to COVID-19, my company’s revenue is suffering. Can I reduce the hours of full-time non-exempt employees?
Yes. Let’s assume the employer decides to reduce the employee’s work schedule from 40 hours per week to 20 hours because international restrictions have negatively impacted the financial condition of the company. That is completely fine under the FLSA. The employer can reduce the employee’s schedule and only has to pay the employee for the time she actually worked (i.e., 20 hours).
If an employee misses work due to COVID-19, employers also need to review their policies and benefit plans, including those related to paid time off and short-term disability benefits. While the FLSA does not require employers to compensate non-exempt employee for absences, obligations can arise due to an employer’s policies and benefit plans.
Question 3: What about deducting pay from exempt employees for absences?
Most FLSA exemptions require that the employee be paid on a salary basis. To be paid on a salary basis means the employee is paid a predetermined weekly salary of at least $684, regardless of how many hours they work in the workweek. In other words, if an exempt employee works one hour on Monday and takes the rest of the week off due to illness, then the employer may be required to pay her entire weekly salary.
FLSA regulations allow employers to make deductions from exempt employee salaries for one or more full days occasioned by sickness or disability provided that the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by that sickness or disability. In plain English, if the employer has created a benefits plan that specifically allows for paid leave in the event of sickness or disability (i.e., paid vacation time, paid sick leave, general paid time off), the employer may “deduct” and substitute with these types of available paid leave in order to provide the regular salary.
Question 4: Does my company have to pay exempt employees’ entire salary even if we temporarily suspend business operations?
The answer to this question is everybody’s favorite response from a lawyer: maybe. If an exempt employee performs no work for an entire workweek, then the employer does not have to pay the employee her salary for that week. That means furloughing an exempt employee for an entire workweek relieves an employer of paying the employee for that week. On the other hand, the general rule is that if an exempt employee works part of a workweek and is furloughed for the rest of the week, she is entitled to be paid her entire salary for that workweek.
That being said, there is a narrow exception to the rule that an exempt employee’s salary cannot be reduced based on the low quantity of available work. The FLSA does not prohibit employers from prospectively reducing an exempt employee’s predetermined salary amount during an extended period of economic slowdown. Such a reduction in salary will not forfeit the employee’s exempt status as long as the employee’s weekly predetermined salary is at least $684 per week. The U.S. Department of Labor has explained that such reductions in salary must be “bona fide and not used as a device to evade the salary basis requirements.” It is also important to remember that once the employee’s new salary is determined, it cannot fluctuate week to week based on the quantity or quality of work.
The Department of Labor has stated that such prospective reductions of salaries are intended only to address long-term business needs. In other words, an employer cannot rely on this exception to change an employee’s salary on a regular basis. Employers should utilize this exception only when they anticipate a prolonged economic downturn.
Again, the most important concern is your employees’ health and safety. However, employers should be mindful of their legal obligations and options so as to not expose themselves to unnecessary FLSA liability as they navigate the current situation related to COVID-19.
We are following new information daily. As we track these developments, we will continue to provide you with recommendations and best practices for dealing with Coronavirus issues in the workplace.