Coronavirus Wage-and-Hour Work Time Implications: New DOL Guidance Regarding the Do’s and Don’ts of Compensating Employees

This article was originally posted by BUCHANAN INGERSOLL & ROONEY PC here and reposted on ESAweb.org with permission.

Employers are now forced to navigate a broad range of employment-related issues – including workplace disruptions – raised by the coronavirus disease 2019 (COVID-19) pandemic. Employers are being challenged on two fronts: (1) they must navigate the regulations and restrictions being imposed by the federal, state and local governments, many of which are changing daily, in an effort to “flatten the curve” and ultimately quell this pandemic; and (2) they must endure the havoc this pandemic has wreaked on the economy. With more restrictions and fewer dollars, employers are left wondering how to handle their most valuable resource – their human capital. New guidance from the U.S. Department of Labor clarifies compensation requirements for employees affected by coronavirus-related business closures.

Unsurprisingly, the threshold question is whether the employees are classified as exempt or non-exempt from overtime requirements.

Non-Exempt Employees

The FLSA does not require employers to pay non-exempt employees for hours they do not work (except that, under the Families First Coronavirus Response Act (FFCRA), the employer may now need to provide certain paid leave).

In response to the pandemic, many employers have implemented new flexible work arrangements to facilitate social distancing as an infection-control strategy. Regardless of whether work is performed at the employer’s office or at home, the FLSA requires that employers maintain an accurate record of hours worked by all non-exempt employees. Employers should implement clearly established policies that mandate that employees accurately record their time.

Business expenses associated with teleworking also present added challenges for employers, particularly for non-exempt employees (who cannot be required to pay expenses for the benefit of the employer that would reduce their compensation below the minimum wage). Employers should set clear expectations up front regarding such expenses to avoid misunderstandings.

Exempt Employees

Exempt, salaried employees must receive their full salary in any week in which they perform any work, including work that is performed remotely, subject to certain limited exceptions. Conversely, under the FLSA, exempt, salaried employees need not be paid their salary in weeks in which they perform no work.1

While the FLSA does not require an employer to provide its employees with vacation or personal time off (PTO), if an employer offers its exempt employees a bona fide benefits plan or vacation time, the employer can require the exempt employee to take accrued leave or benefits on specific days to help fulfill its obligation to pay them their full salary.

Additionally, the FLSA generally does not prohibit employers from prospectively reducing an exempt employee’s weekly salary so long as it remains at or above $684 per week ($35,568 annually). For example, an employer can decide that, to save costs, it will reduce all exempt employees’ salaries by 20 percent starting on April 20 (so long as they remain at or above the foregoing figures) – though state law may require a specific period of advance notice before implementing a change in pay rates.

The key takeaway here is that employers generally cannot make deductions from the predetermined compensation for absences occasioned by an office closure during a week in which the exempt employee performs any work. Otherwise, the employer jeopardizes the exempt employee’s (and the general classification’s) exemption status.

For industry-specific resources to aid in business responses to the climate created by COVID-19, visit ESA’s resource page at esaweb.org/covid-resources.