This Memorandum is not about COVID-19. At least not directly. It is about how employers can best be prepared for the increase in litigation that may well occur in the coming months. Employers need to consider now the real likelihood of increased wage and hour and employment discrimination litigation. This memo is driven by experience – in economic downturns employees are more prone to file suit. The plaintiffs’ bar has been given significant incentive by federal, state and city statutes to bring lawsuits on behalf of employees by allowing, generally, plaintiffs’ counsel to collect attorney fees and costs, in addition to liquidated damages and penalties. The purpose of this memo is to highlight some likely areas of increased litigation that, during these extraordinary times, employers may have understandably overlooked.
Wage and Hour Laws
A. Recordkeeping and a Remote Workforce
Federal and State statutes require overtime after forty (40) hours of work per week for non-exempt employees. These statutes hold employers responsible for maintaining accurate and detailed records of time worked. This presents a unique challenge when, due to the COVID-19 crisis, the majority of the workforce is suddenly working from home. Despite the circumstances of this arrangement, the burden is still squarely on employers to ensure employees properly record their actual hours worked, including all overtime and statutorily required meal breaks. New York State law requires that records of hours worked be maintained for at least six (6) years.
It is advisable to give non-exempt employees clear direction regarding their work hours and break times and require written approval for overtime. Employers must provide documented timekeeping instructions and mandate that employees record hours worked. Working remotely tends to blur the notion of traditional work hours, so employers must also be diligent in making sure that supervisors recognize the boundaries of employees’ working hours so as not to inadvertently forward an email, document or assignment on non-work time that does not clearly and unequivocally tell the employee not to commence work until regular work hours.
B. Maintaining Exempt Status
The COVID-19 crisis has forced many employers to reduce working hours and, in some cases, reduce pay for exempt employees. Employers must take care so as not to reduce an exempt employee’s salary below the statutory minimum thresholds for exempt classification under federal and state law. In New York City, that minimum is currently $58,500 per year. In Nassau, Suffolk and Westchester counties, the minimum salary is $50,700. In the remainder of New York State, the minimum salary threshold is $46,020.
Finally, employers have to make certain that their exempt employees continue to function in an exempt capacity. Exempt status generally falls into three categories – professional, administrative and executive. Each of these exemption categories also has a “duties” test.
Also remember that as a general rule, an employee classified as exempt must receive their full salary for any week in which they perform work. Limited exceptions apply, but deducting pay for a few hours missed or “docking” pay is generally not permissible. Failure to follow this important rule could jeopardize the employee’s exempt status and expose an employer to liability for unpaid overtime, interest and penalties.
C. Wage Theft Prevention Act and Salary Reductions
We are particularly concerned that employers will overlook New York State’s Wage Theft Prevention Act (“WTPA”), which requires employers to provide all workers, even exempt employees, with written notice when there is a change in an employee’s rate of pay or the basis of the pay rate ( by the hour, shift, day, week, salary, commission, etc.).
Sample notices, in a variety of languages, can be found on the NYSDOL website: https://labor.ny.gov/formsdocs/wp/ellsformsandpublications.shtm#Wage_Theft_Prevention. Employers must continue to collect signed acknowledgements of receipt and provide a copy to the employee. Employers can deliver the WTPA notices by mail or electronically via email. If an employee refuses to sign the form, a notation of the refusal must be retained by the employer.
D. Misclassification of Employees as Independent Contractors
Employers are cautioned to avoid converting or treating employees as independent contractors in the hope of avoiding minimum wage, overtime and other traditional employment-based claims. Generally, a person is classified as an independent contractor where he/she exercises control over how, where and when the work is performed. Employers must also remember that independent contractors, who are generally ineligible for unemployment benefits, may file for unemployment under the CARES Act Pandemic Unemployment Assistance program. Employers should promptly respond to any requests for information from the NYSDOL Unemployment Insurance Division related to claims for unemployment benefits.
E. COVID 19-Related Leaves of Absence, Workplace Accommodations, Discrimination and Return to Work Issues
The rapid fire federal, state and local promulgation of leave and accommodation laws in response to COVID-19 is sure to be the focus of the plaintiffs’ bar in the coming months. A review of their websites demonstrates such intent is clear. These issues are likely to arise not only with existing staff, with for instance, leave entitlement claims, but also when employees return to work from lay-off or furlough status and even in connection with new hires. Accordingly, we encourage employers to carefully review and comply with their obligations under these new laws. Our recent memoranda may be found on our website at https://www.kanekessler.com/insights/ .
Issues surrounding leaves, disabilities and workplace accommodations have always been a minefield for employers and, once the crisis abates, will be even more challenging to navigate. There will be increased recordkeeping and confidentiality requirements placed on employers. When employees return to work, or when new employees are hired, we anticipate increased claims of discrimination, retaliation and perceived disability discrimination. Employers should also recognize that employees will be concerned about returning to work which may manifest itself in claims that an employer has failed to provide a safe working environment. We encourage employers to continue to monitor and follow the CDC guidance for businesses and employers which may be found here: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html. Like the other issues outlined in this Memorandum, employers are encouraged to consult with counsel to ascertain the best legal course of action before making decisions that might unintentionally prove costly.
If you have any questions, please do not hesitate to contact David R. Rothfeld, Lois M. Traub, Alexander Soric, Jennifer Schmalz, Robert L. Sacks, Jaclyn Ruocco, Joseph Tangredi, or Brian Polivy.