Part Eight of the COVID-19 Roadmap Series: Avoiding COVID-19 Wage & Hour and Labor Law Pitfalls
By Jennifer R. Budoff, Delaney M. Busch, Brendan J. Lowd
In Part Eight of our Roadmap Series, we take a closer look at wage and hour compliance concerns that may arise during the COVID-19 pandemic, and what employers can do to minimize these pitfalls.
Remember that wage and hour concerns, and how to properly address them, will often depend on whether a company is dealing with exempt employees (i.e., employees not entitled to overtime pay regardless of the number of hours worked in a day or week) or non-exempt employees (i.e., employees entitled to overtime pay if the employee works more than eight hours a day or forty hours in a week, depending on the state). This critical distinction will largely govern how employers should consider and plan for the issues described below.
Do Employers Need to Pay Non-Exempt Employees for Time Spent During Screening Protocols?
Employers who intend to require the use of protective gear or conduct temperature monitoring of employees should be prepared to address key legal issues that may arise, including federal and state wage and hour requirements for screening time. Although federal COVID-19 guidance provided by the Equal Employment Opportunity Commission (“EEOC”) allows employers to measure employees’ body temperatures without fear of violating disability law, that guidance does not address wage and hour compliance. Likewise, guidance from the Occupational Safety and Health Administration (“OSHA”) and the Centers for Disease Control and Prevention (the “CDC”) do not consider wage and hour implications.
While courts do not appear to have squarely addressed whether employers are required to pay employees for time spent measuring body temperatures during a pandemic, certain state and federal court decisions may shed light on how courts may decide this question.
Is the Screening Part of the Employees’ “Principal Activity?”
Under federal law, the critical question in assessing whether employee testing time or donning and doffing protective gear is compensable, is whether such activity constitutes a “principal activity” under the FLSA.
In 2014, a seminal decision was issued by the U.S. Supreme Court, Integrity Staffing Solutions v. Busk, in which the justices held that post-shift security checks for warehouse workers were not compensable under the Fair Labor Standards Act (“FLSA”). The Court explained that only activities that constitute a “principal activity” under the FLSA must be compensated. Under the statute, principal activities include all activities that are “an integral and indispensable part of the employee’s principal activities.” The Court stated that “[a]n activity is ‘integral and indispensable,’ if it is an intrinsic element of the principal activities and one which the employee must do in order to perform their principal activities.” The Busk decision explained that the employees were not hired to go through security screenings, but to retrieve products from warehouse shelves and package them for shipment. Security screenings were not integral and indispensable to the “performance of productive work,” as the FLSA regulations require. Further, the Court observed that, unlike requiring pre-shift donning and doffing of protective gear for a battery plant worker or knife sharpening before a butcher cuts meat, the employer could have completely eliminated the security screenings altogether without impairing the safety or effectiveness of the employees’ principal activities.
Ultimately, whether an employer must compensate an employee for time spent measuring temperatures or donning/doffing protective gear is a highly fact-specific question for each employer. Within the COVID-19 context, and given the importance of providing a safe physical workspace – including ensuring that infected employees are not reporting to work – measuring employees’ temperatures or donning/doffing personal protective equipment (“PPE”) may be akin to situations where employees must don and doff protective gear in order to safely perform their jobs (e.g., in a battery plant), particularly in light of COVID-19 exposure as opposed to the limited health concerns in Busk.
Is Waiting Time Considered a “Preliminary” or “Postliminary” Activity?
Whether wait time is compensable is also highly fact-specific for each employer. Under the FLSA, activities that are “preliminary” and “postliminary” to principal activities do not have to be compensated. The “continuous workday rule,” has been incorporated by the Department of Labor (“DOL”) into its guidelines, which typically defines a “workday” as “the period between the commencement and completion on the same workday of an employee’s principal activity or activities.” In instances where putting on protective gear is considered a principal activity (and thus compensable), the U.S. Supreme Court has said that time spent waiting to put on the gear is not compensable under the FLSA. This analysis suggests that in the context of COVID-19, time spent waiting to have temperatures checked or to undergo screening may also be excluded from FLSA coverage. If the waiting time is considered a preliminary or postliminary activity, then it is not compensable under the FLSA.
State Laws Add an Additional Consideration for Employers
In addition to the FLSA, employers should account for applicable state laws when assessing whether certain screening activities are considered principal activities. Although Busk decreased the risk of federal lawsuits in the security screening arena, many state laws vary from the FLSA, and often the scope of state wage laws are determined by judicial decisions. For example:
In a February 2020 decision (Amanda Frlekin v. Apple, Inc.), the Ninth Circuit Court of Appeals held that Apple’s post-shift security checks of employees were compensable under California state wage laws.
Also in February 2020, the Tenth Circuit Court of Appeals held in Aguilar v. Management & Training Corp. that time spent by detention officers in pre-shift and post-shift security screenings were compensable under the FLSA and the New Mexico Minimum Wage Act.
Federal courts in Pennsylvania and New Jersey are also currently considering whether time spent on an employer’s premises waiting to undergo and/or undergoing a mandatory security screening is compensable under applicable wage laws. Given the potential differences in wage law from one state to the next, it is crucial that employers consider the applicable state laws alongside the FLSA to determine whether time employees spend waiting for screening or testing is compensable.
In light of COVID-19 and recent court rulings, it may be the safest approach for employers to interpret the FLSA and applicable state laws in a more cautious manner, and compensate employees for time spent screening or donning/doffing PPE. This is a highly fact-specific question, however, and employers are encouraged to discuss this issue with counsel prior to putting any procedures in place. Further, employers should adopt appropriate recordkeeping and timekeeping mechanisms to track compliance where necessary.
Strengthening Timekeeping Practices and Guarding Against “Off the Clock” Work for Non-Exempt Employees
With more employees telecommuting than ever before, it is important to revisit and revise timekeeping practices if necessary. For many employers, this is the first time the non-exempt workforce may be working remotely, which presents its own unique challenges. Below is a high-level overview of steps employers can and should take to minimize risk and adapt to the changing environment.
Reiterate Timekeeping Practices: If employers have not already done so, reiterate timekeeping practices in writing to all employees, with a clear indication that they will be enforced to the same extent as when employees were working in the office. For example, if a manger or supervisor is receiving communications from a non-exempt employee outside of his or her working hours, this should be addressed promptly.
Communicate with Managers and Supervisors: Caution managers and supervisors against communicating with non-exempt employees outside of their set schedules. Ensure clear boundaries are established to avoid non-exempt employees working outside their normal work hours, as this can result in the need for additional pay, or worse, a claim that the employee was not paid for time worked.
Distribute a COVID-19 Telecommuting Policy: To the extent employers do not already have a telecommuting policy, or if the current policy is not adequate, consider creating one that sets expectations around remote work including: (1) expected hours; (2) rest and lunch breaks; (3) procedures for timekeeping; and (4) procedures for communicating with managers and vice versa.
Update Current Timekeeping Systems: Determine if current timekeeping systems need to be updated or revised to account for remote working arrangements. It may be necessary to put new protocols in place, such as employees notifying their supervisors of their time worked each day.
Ask Employees to Certify Time Worked: As part of the timekeeping process, employees should be asked to record their time each day and certify that the amount recorded is accurate and illustrates their time worked. This will be helpful later on should questions or claims arise regarding overtime.
Remember Mandated Meal and Rest Breaks: Meal and rest breaks should be provided and enforced in the same manner that they were when non-exempt employees were in the office. Keep in mind that these requirements may vary from state to state, so ensure you are adhering to your state’s specific guidelines.
Ensure Set Schedules: If employees previously followed a set schedule (as was almost certainly the case for non-exempt employees), employees should adhere to a schedule now as well. However, remember that this does not necessarily mean the same schedule as the employee was working pre-pandemic. Keep in mind that schedules may need to be adjusted to account for changed family circumstances including childcare, or caring for ill family members.
Be Mindful of Expenses Incurred When Working Remote: Employers may not require employees to pay or reimburse the employer for items that are business expenses, if doing so would reduce the employee’s earnings below the required minimum wage or overtime compensation rate. In addition, employers may not require employees to pay or reimburse the employer for items provided to a qualified individual with a disability as a reasonable accommodation while telecommuting. As some states, including California, require employers to reimburse employees for reasonable and necessary business expenses, employers should be mindful of state laws in this area.
For those employees returning to the workplace (or for those that never left), there are other considerations to keep in mind that may raise additional wage and hour concerns. For example:
Staggered Shifts or Modified Break Times: Consider having employees report to the office on alternating days or staggered start times in order to decrease the number of individuals in the office at one time. Companies may also want to stagger break times to allow for greater social distancing in office common areas like kitchens, restrooms, and entrances/exits.
Altering the Workweek: With a return to the office, some employers may decide to alter the current workweek (e.g., perhaps changing the workweek from 35 to 40 hours). Should employers decide to do so, remember to account for the following:
For non-exempt salaried employees, the calculated hourly rate will decrease and employers must ensure that the rate is still above minimum wage and adjust calculations of overtime pay accordingly;
If the way in which the company defines the workweek will change, employees should be notified of the change and employers should consult state or local law regarding any specific notification requirements;
Similarly, if there is a change to the rate of pay, the regular payday, or how the employee is paid, employees should also be notified in advance and in writing;
Ensure coordination of the change in hours with your payroll department so employees are compensated appropriately for the first paychecks issued after the change. This will also depend on how a company structures its payroll (i.e., current or in arrears).
Required breaks and meal periods for non-exempt employees may also be affected by the change in hours. Employers should consult state and local law on these points.
Be Consistent: Most importantly, when making decisions around altering schedules or break times, remember to do so in a consistent manner, keeping in mind the potential for disparate impact or disparate treatment discrimination claims. In addition, be prepared for pushback from employees in connection with schedule changes, especially from those with ongoing childcare concerns.
Be Mindful of Wage and Hour Classification Conversation Issues
In light of telecommuting and other changes to how the workweek used to operate, employers should carefully consider their exempt and non-exempt employee classifications.
The general rule under the FLSA is that exempt, salaried employees must receive their full salary in any week in which they perform any work, subject to limited exceptions (the so-called “salary basis” test). This is true regardless of whether exempt employees are working at home or at the employer’s office. Note, however, as stated in a DOL Q&A document on the FLSA, “[w]here an employer offers a bona fide benefits plan or vacation time to its employees, there is no prohibition on an employer requiring that such accrued leave or vacation time be taken on a specific day(s). Further, this will not affect the employee’s salary basis of payment so long as the employee still receives in payment an amount equal to the employee’s guaranteed salary. However, an employee will not be considered paid ‘on a salary basis’ if deductions from the predetermined compensation are made for absences occasioned by the office closure during a week in which the employee performs any work.” Thus, employers should, whether through full salary payments or payments for paid time off, guarantee that exempt employees receive their full salary each week in which they perform any work.
Because of this general rule, if an employer wishes to maintain an at-will employee’s exempt status, an attractive option may be to reduce an employee’s salary. Under federal law, the minimum salary amount for the white collar exemptions is $684 per workweek. This decision may lead to practical, employee morale issues, but as to the law, DOL has clarified that “[a]n employer is not prohibited from prospectively reducing the predetermined salary amount to be paid regularly to a [white collar] exempt employee during a business or economic slowdown, provided the change is bona fide and not used as a device to evade the salary basis requirements. Such a predetermined regular salary reduction, not related to the quantity or quality of work performed, will not result in loss of the exemption . . . .” However, the reduction should be made for the long-term (at least a month) because constant “day-to-day or week-to-week” deductions will result in a loss of the exemption. For example, an employee who normally receives a salary of $1,000 per week would likely be deemed non-exempt if the employer, even due to COVID-19 related business interruption, changed an employee’s salary on a weekly basis (e.g., $1,000 in week 1, $800 in week 2, $700 in week 3, etc.).
If an employer decides against maintaining an at-will employee’s exempt status, the employer can reclassify the employee as non-exempt. Reclassification decisions, however, are not without risk and it would be prudent for employers to consult with counsel before making reclassification decisions. Non-exempt employees must be paid for all the hours that they work, and they must be paid at least the federal minimum wage as well as overtime premium pay at one and one-half times the employee’s regular rate. At a minimum, when reclassifying employees, employers should ensure that the reclassification is stated in writing with the rate of pay, whether hourly or salary, clearly communicated to the employee. Further, and as stated above, employers should track and record hours worked by non-exempt employees each week. Moreover, employers should, as always, monitor overtime work by non-exempt employees. Employers can require that overtime work be pre-approved, but even non-approved overtime work must be paid at the applicable rate (though an employer can discipline an employee for working overtime hours without approval in violation of the employer’s policy).
Finally, like all wage and hour issues, employers have to be mindful that exemption issues are also subject to the requirements of state and local law.
Parting Thoughts & More to Come
Employers that take the time to plan and assess potential wage and hour issues that may arise once employees return to work (or for employees continuing to telecommute) will be in better shape in the upcoming months to address the ever changing landscape created by COVID-19. Developing appropriate time keeping practices and records can help employers meet the many challenges once the office doors re-open.
Next in our Roadmap Series, we address issues relating to COVID-19 leave management and compliance.