U.S. Wage and Hour Considerations Associated With COVID-19
As a result of the current pandemic, employers throughout the country are making significant changes to their workforce. Among other things, many employers—whether by choice or government mandate—are instructing their employees to work from home. Others are temporarily furloughing their employees or reducing their compensation. In implementing these changes, employers should be aware of the potential wage and hour issues that could arise under the federal Fair Labor Standards Act (“FLSA”) and similar state wage and hour laws. Similar issues may arise when employees start re-entering the workplace as COVID restrictions are slowly lifted. For example, should employees be paid for time spent during a temperature check? Are employees’ overtime exempt statuses still warranted after COVID?
1. How do employers ensure that non-exempt employees are properly compensated for their work at home?
Under the FLSA, hourly, non-exempt employees must be paid at least the applicable minimum wage or any higher agreed-upon wage for all hours worked. Compensating hourly employees for their working time is not terribly difficult when the employees are physically performing their jobs at the workplace. Most employers simply require the hourly employees to clock in and out through a physical time clock and subsequently monitor the employees’ activities throughout the day to ensure the employees are indeed performing compensable work. Tracking employees’ compensable time becomes far more challenging, however, in times such as this, when hourly employees are now performing their duties remotely from their home offices. Nonetheless, there are a number of practical measures employers can take to ensure that their hourly employees are properly compensated, so let’s talk about those.
i. Tracking employees’ remote working time
At the most basic level, employers will of course need to implement a mechanism for hourly employees to record their working time from home. There are a number of software applications that allow employees to clock in/out at home in the same manner they would otherwise clock in/out at work. While the various applications have their own unique nuances, employers should ensure that the application they select can easily communicate with their payroll system. Employers should also ensure that the software will properly store the employees’ time data because the FLSA requires that records of such data be properly maintained. See U.S. Dep’t of Labor, Wage & Hour Div., Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA), available at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs21.pdf.
While the implementation of a time-recording system is a necessary first step, employers must take additional measures to ensure that hourly employees working from home are properly compensated—in particular, employers must ensure that hourly employees do not perform compensable work off the clock. When employees work remotely, there is an increased risk that they may perform their duties outside of their normal working hours (and therefore may not remember to clock in). This is particularly true for employees – especially exempt, salaried employees – who may be communicating regarding work matters via email on their mobile devices. An employer’s failure to pay an employee for that compensable, unrecorded time can subject the employer to liability under the FLSA. While this risk cannot be fully eliminated, employers can mitigate their risk by clearly communicating their expectations and restrictions to their hourly employees. Specifically, employers must ensure that hourly employees understand that off-the-clock work is strictly prohibited. Employers should also consider informing their hourly employees that they can and should take their usual breaks throughout the day. Whether the employees should clock out during these breaks will generally depend on applicable state law. Under federal law, any rest periods of “short duration, running from 5 minutes to about 20 minutes” are “customarily paid for as working time.” 29 C.F.R § 785.18 This is, of course, true for employees working from home as well. Thus, any breaks of “short duration” – typically, restroom breaks, quick coffee breaks and the like – should be paid.
ii. Preventing employee timeclock abuse
Employers are also understandably concerned about employees abusing their work-from-home capabilities. In particular, employers are concerned about overtime abuse and employees spending their recorded (clocked-in) time on personal matters. While the potential for employee abuse cannot be completely eliminated, employers can take action to encourage proper behavior. Specifically, with respect to overtime, many companies have implemented policies, which strictly prohibit unauthorized overtime; an employee’s failure to comply with such policy can subject the employee to discipline or even termination. However, even if an employee works overtime that was not authorized, it must still be paid. Employers can deal with these issues through performance management – not by withholding pay for time worked.
With respect to employees’ misuse of time, many companies have installed various tracking tools on their employees’ work devices to monitor their employees’ web activities throughout the day; this not only ensures that hourly employees are performing compensable work while clocked in, but it also allows companies to analyze their employees’ overall productivity and efficiency. With that said, the types of tracking tools available to employers vary greatly, and employers would be well advised to consult counsel prior to installing any such tool on their employees’ devices. Employers do not want to run afoul of any state-level privacy concerns, or regulations or guidance under the National Labor Relations Act.
2. Wage and hour risks of furloughing exempt employees or modifying their salaries
While furloughing exempt employees can certainly prove beneficial for retaining talent and reducing costs, companies must ensure that they structure the furloughed leave in a manner that does not give rise to a violation under the FLSA.
As a general matter, the FLSA does not require employers to pay their exempt, salaried employees in weeks in which they perform no work. However, if salaried workers perform any work in a given workweek, the FLSA mandates that such employees receive their entire salary for that particular week. Indeed, even if the exempt employee may have only performed one minute of work on a particular day – including answering one e-mail or taking a single phone call – they are entitled to full pay for that entire week. Deductions (or failing to pay an exempt employee’s full ordinary compensation) from an exempt employees’ pay are permissible only under the following narrow circumstances:
- When an employee is absent from work for one or more full days for personal reasons other than sickness or disability (such as vacation or personal travel);
- For absences of one or more full days due to sickness or disability if the deduction is made in accordance with an employer’s bona fide sick leave plan or practice;
- To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
- For penalties imposed in good faith for infractions of safety rules of major significance;
- For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
- In the employee's initial or terminal week of employment if the employee does not work the full week, or
- For unpaid leave taken by the employee under the Federal Family and Medical Leave Act.
See Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (available at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fs17g_salary.pdf). Other than the items above, as a general matter, exempt employees must be paid their full salary. Thus, to the extent employers require their furloughed, salaried employees to take several weeks of unpaid leave in full-week increments, they must ensure that these employees do not perform any work at home during that designated period of time. Employers must ensure that they clearly communicate the prohibition of work to those furloughed, salaried employees on unpaid leave. In addition to that communication, as an extra precaution, employers should consider deactivating those employees’ emails during the furloughed period or cutting off their remote access to email. At a minimum, employers should closely monitor their furloughed, salaried workers’ email activity to ensure that they are aware of any compensable work being performed (i.e., any e-mails being sent by that exempt employee on furlough).
Alternatively, many companies have opted to temporarily reduce the pay and hours of their salaried employees. As a general rule, the FLSA requires an employer to pay an exempt employee his full salary amount “free and clear” for any week in which the employee performs work; thus, a reduction in an exempt employee’s predetermined salary will typically cause a loss of the exemption. However, the FLSA permits an employer to prospectively reduce an exempt employee’s predetermined salary without impacting their exempt status as long as the reduction is “bona fide” and “not related to the quantity or quality of work performed.” See U.S. Dep’t of Labor, Wage & Hour Div., Fact Sheet #70: Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues, available at https://www.dol.gov/agencies/whd/fact-sheets/70-flsa-furloughs. Thus, in the context of a pandemic like COVID-19, a temporary prospective reduction in an employee’s predetermined salary would likely not impact the employee’s exempt status under the FLSA. However, even if the temporary reduction is justified under the FLSA, employers must ensure that the reduction does not reduce an exempt employee’s salary below $684 per week, since this is the new (as of January 2020) required minimum for exempt employees under Section 13(a)(1) of the FLSA.
3. Return to Work Issues
i. Paying for time spent in Temperature Screenings and Donning of PPE
Upon employees’ slow return to the workplace, many employers are instituting, and many jurisdictions are, in fact, actually requiring, a variety of measures to ensure the safety of the workplace, including requiring employees to submit to temperature screenings or to don particular personal protective equipment (or “PPE”) – such as masks and gloves – prior to entering the premises. While federal guidance certainly affirms the validity of non-discriminatory temperature screenings and donning of PPE, employers should recognize that they may be obligated to pay employees for the time they spend participating in these screenings and suiting up measures.
The FLSA mandates that employees receive compensation for all compensable time. Generally speaking, compensable time includes all work that an employer “suffers or permits” its employees to work in a “workday” (defined as the time period beginning when an employee begins his or her “principal activity” and ending when he or she ceases her “principal activity”). The U.S. Supreme Court has held that an employee’s principal activity includes those pre- and post-shift activities that are “integral and indispensable” to the work the employee is hired to perform. Integrity Staffing Sols., Inc. v. Busk, 574 U.S. 27, 33 (2014). An activity satisfies that test if it is “one with which the employee cannot dispense if he is to perform his principal activities.” Id. The Supreme Court has further found that activities, such as the donning and doffing of specialized protective gear, “performed either before or after the regular work shift, off the production line, are compensable . . . if those activities are an integral and indispensable part of the [employees’] principal activities[.]” Steiner v. Mitchell, 350 U.S. 247, 256 (1956).
In light of this legal precedent, the time employees spend participating in workplace temperature screenings, or in suiting up with PPE such as gloves and masks, would likely be found by a court or the Department of Labor to be “working time” that should be paid. If it is impractical or impossible to determine the exact amount of time each employee spent in the screening process, employers should pay employees based upon an average amount of time and ask employees to notify a supervisor/manager if their actual screening time exceeds the average screening time so they are fully compensated.
A separate but related issue is whether companies should also compensate employees for the time they spend waiting on temperature screenings. The Supreme Court has previously determined that time spent waiting to don protective gear is not compensable (even though donning such gear was a principal activity) because the employees’ waiting time was found to be “two steps removed from the productive activity on the assembly line.” See IBP, Inc. v. Alvarez, 546 U.S. 21, 23 (2005). However, the Court noted that such time could have been compensable if the employer had “required its workers to report to the changing area at a specific time only to find that no protective gear was available until after some time had elapsed[.]” Id. at 41. Thus, to the extent employers are requiring temperature screenings, at least one Supreme Court holding would suggest that the time employees spend waiting for their temperature screenings or waiting to put on their gloves and masks would not be compensable unless employees are required to arrive at a particular time for these screenings and the employer delays the screenings for some period of time, even by a few minutes. With that said, however, the compensability of time associated with temperature screenings will undoubtedly vary on a case-by-case basis, and employers should consult with counsel to ensure their compensation practices align with the requirements of the FLSA.
ii. Evaluating the Overtime Exempt Statuses of Returning Employees
The pandemic has undoubtedly changed the operating structure of many businesses. Among other things, many employers have been forced to reduce their workforce and significantly modify the duties of their remaining employees, including those employees who are now beginning to return to work. As a result of these changes, employers must carefully evaluate whether their returning salaried employees are properly classified under the FLSA. By way of example, if a salaried employee returns to work to find that one of more of her direct reports is no longer employed by the company, the salaried employee may no longer qualify under the FLSA’s executive exemption – which allows for an overtime exempt status if, among other things, the employee “customarily and regularly directs the work of at least two or more other full-time employees.” Similarly, if a salaried employee, who formerly focused primarily on non-manual, management-related tasks, is asked to return to work in a more labor-intensive position, he or she would likely no longer qualify under the FLSA’s administrative exemption. Furthermore, on a much more basic level, many salaried employees returning to work will certainly see reductions in their compensation. To the extent these reductions reduce a salaried employee’s compensation below the minimum required for the FLSA’s exemptions (i.e., at least $684 per week), an employer must reclassify that employee’s status from exempt to non-exempt and pay the employee overtime pay for any overtime hours worked.
On the other hand, many employers have already reclassified certain employees from exempt to nonexempt and are now considering restoring those employees’ exempt status. As noted above, while federal guidance suggests that such reclassifications are permitted under the FLSA (as long as all of the elements of one of the exemption tests are satisfied), employers must ensure that they do not reclassify employees repeatedly, especially if there may be any second or third COVID-related spikes and subsequent government-mandated closures. So, before making any such change, companies should carefully evaluate their future long-term business needs and the employee’s actual duties – not those duties that were simply intended or written into the position description, but those duties that the employee actually performs on a day-to-day basis – to ensure that the employer can adequately support the employee’s continued exempt status. Regardless of whether the employee is being reclassified from exempt to nonexempt or vice versa, employers must ensure that they properly communicate any such change in advance to the employee in accordance with state and federal law. There are some states, like Missouri for example, that require a specific amount of notice to an employee – up to 30 days – before reducing their pay.
BCLP has assembled a COVID-19 HR and Labor & Employment taskforce to assist clients with labor and employment issues across various jurisdictions. You can contact the taskforce at: COVID-19HRLabour&EmploymentIssues@bclplaw.com. You can also view other thought leadership, guidance, and helpful information on our dedicated COVID-19 / Coronavirus resources page at https://www.bclplaw.com/en-GB/topics/covid-19/coronavirus-covid-19-resources.html
This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.