COVID-19 & THE EMPLOYMENT LITIGATION HORIZON: UPDATE #4—WAGE AND HOUR LITIGATION
As Georgia and other states begin to “open,” and employers in those states take their first tentative steps toward recalling furloughed workers to previously shuttered workplaces, they face a constantly shifting legal landscape and a host of litigation risks. As a litigation boutique that represents employers, executives and workers, our purpose here is not to wade into the debate over the wisdom of such re-openings but, rather, to provide some (hopefully) helpful information to those weighing such difficult decisions—and those impacted by them. This is the fourth in a series of posts addressing such issues, which we will update consistently over the coming weeks. This fourth installment addresses wage and hour claims under the Fair Labor Standards Act or “FLSA.”
FLSA Claims. The Fair Labor Standards Act, or FLSA, is the federal law that requires employers to pay workers a minimum hourly wage and overtime pay. The statute is enforced by the Wage and Hour Division of the U.S. Department of Labor. In Georgia, the Wage and Hour Division maintains district offices in Atlanta and Savannah.
The FLSA requires most employers to pay most employees (1) a minimum wage of $7.25 per hour; and (2) overtime pay, of at least 1.5 times that rate, for hours worked over 40 per week. The statute, however, exempts certain categories of employees from these minimum wage and overtime requirements. The broadest of these categories is the so-called “white collar exemption,” which applies to “[e]xecutive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations.” Employers may pay exempt employees a salary (of at least $684 per week) and they need not pay them overtime (for hours worked over 40 per week).
The coronavirus pandemic—and, in particular, the work-from-home (WFH) practices that the coronavirus pandemic has necessitated—create a host of potential FLSA compliance problems that practitioners anticipate will lead to a wave of wage-and-hour litigation in the coming months. We briefly discuss some of the anticipated compliance problems below:
Unpaid Wages. The greatest compliance issue that practitioners foresee surrounds the FLSA’s core requirement that employers pay hourly workers for all hours worked in a given workweek, including overtime hours. Under ordinary circumstances, when employees physically report to work, schedules are fairly easy to observe and hours are fairly easy to record and monitor. Employers may, for example, require hourly workers to “punch in” and “punch out” at their scheduled arrival and departure from work, as well as for scheduled meal and rest breaks. With employees working remotely, schedules and hours are not as easily kept. This could cause various lapses, which could in turn expose employers to claims for unpaid wages. For example, if hourly workers are asked to join conference calls, participate in video conferences, or respond to emails outside of their normal working hours—all foreseeable practices in a remote working environment—it could expose employers to “off the clock” and overtime pay claims . As such, practitioners recommend that employers take the following steps to safeguard against such activities and potential claims:
Develop and distribute a written WFH policy that clearly articulates what is expected of employees who are working remotely (as well as those managing them);
Utilize timekeeping applications or software programs that enable employees to input their hours remotely;
Require employees to enter their time contemporaneously, the same as might be required when they physically report to work;
Require employees to certify their hours on a daily basis, either using timekeeping software or by some other means;
Require employees to take required meal and rest breaks and record same;
Emphasize to managers and employees that employees are expected to maintain their ordinary schedules unless otherwise instructed; and
Prohibit overtime hours without prior employer authorization.
Business Expenses. The FLSA prohibits employers from deducing the cost of business-related expenses from employee pay if doing so would reduce pay to below the minimum wage. In some states, this prohibition is even stronger—requiring employers to reimburse employees for necessary business expenses. In the current environment, both employers and employees may incur business expenses that are necessary to ensure safety (such as personal protective equipment(PPE)) or to facilitate teleworking (computing equipment, software licenses and so on). Deducting such expenses from employee pay and/or failing to reimburse employees for such expenses (as may be required by state law) could lead to legal exposure.
Testing/Temperature Reading/PPE. As businesses being to re-open, employers may adopt safety rules that include, for example, requiring employees to don certain PPE, taking employees’ temperatures, or even testing them for COVID-19. It is an open legal question whether time devoted to such activities (e.g., donning PPE or waiting in line for a temperature check) will be deemed “compensable time” under the FLSA. Clearly, however, the answer to that question will depend on fact questions specific to the employer, the employee or class of employees, and their particular job duties. Thus, employers must carefully consider whether to treat such time as compensable when implementing such safety policies.
Uncompensated Work. The FLSA requires employers to pay exempt employees their entire weekly salary for any week in which they work. This creates a potential compliance problem around unpaid leave. An exempt employee on unpaid leave ought not be asked to work during the period of such leave—an easy enough requirement to comply with under ordinary circumstances. With employees working remotely, however, it easy to foresee an employee on unpaid leave being asked to participate in a conference call, join a video conference, or respond to a time sensitive email. Such work could trigger the obligation to pay the employee’s entirely weekly salary, notwithstanding her leave status. Worse, failure to properly pay exempt employees could lead to the loss of that employees exempt status.
For exempt employees to retain their exempt status, they must devote the majority of their time to exempt activities. A potential compliance problem arises when employers use exempt workers to fill gaps caused by corona-virus related exigencies, such as labor shortages caused by stay-at-home orders. Think, for example, of an (exempt) office manager who an employer asks to temporarily perform the duties of an absent (non-exempt) shipping clerk. If, in a given workweek, the office manager performs mostly non-exempt clerk work, she would, arguably be entitled to overtime compensation, notwithstanding her customarily exempt status. Note, however, that the FLSA contains an “emergency situation” exception that might apply in the situation outlined above. That exception applies where circumstances “directly threaten[ ] human life or safety, serious damage to property, or serious disruption to the operations of an activity,” and there is “no recourse other than to assign qualified employees to temporarily perform work or duties in connection with the emergency.”