Labor & Employment: Expert View
EXPERT VIEW: Chambers Global Practice Guide Authors on Labor & Employment
COVID-19 Impact on U.S. Employers
By: Louis DiLorenzo, Esq. and Mallory Campbell, Esq.
On 11 March 2020, the World Health Organization characterised the COVID-19 outbreak as a pandemic. The dual crisis of a public health emergency and a virtual halt in the economy has triggered a variety of reactions from all levels of government in the USA. US employers continuing essential operations, discontinuing operations, or engaging in some combination of both, have been impacted by the US response to COVID-19. The major areas are briefly set forth below.
While some employers are operating under new restrictions, others, due to lack of demand or governmental order, must allow employees to work remotely or lay off unneeded workers. The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) provides benefits to both laid off employees and to employers who retain their employees.
To provide some relief to the employees furloughed or laid off, the CARES Act provides enhanced unemployment benefits. These enhanced benefits include:
• a larger benefit amount of USD600 in addition to the state benefit;
• the availability of benefits for a longer period of time (up to 39 weeks);
• extended coverage for individuals who are not typically eligible for unemployment (including self-employed individuals and independent contractors); and
• a waiver of the typical seven-day waiting period before individuals can start collecting benefits.
Employers who retain their employees and meet certain conditions are entitled to credits against payrolls taxes, as well as for certain expenses incurred with respect to employer-maintained health plans. The credit against employment taxes for each quarter equals 50% of the “qualified wages” paid to employees during the COVID-19 crisis, capped at $10,000 per employee.
The CARES Act also provides a number of loans available to businesses to help retain employees, such as the Paycheck Protection Program (PPP). The PPP is a low-interest loan aimed at assisting small businesses to retain employees and maintain payroll. The loan amount is equal to two and a half times the average monthly payroll costs, based on the prior year up to USD10 million. PPP borrowers are eligible for loan forgiveness for certain costs incurred and payments made during the nine-week period from the date of loan origination. Businesses that obtain a PPP loan may be ineligible for other benefits under the CARES Act. The PPP has already exhausted its allotted funds. It is unclear at this time whether this programme will reopen. Other loan programmes are expected to be launched in the coming weeks, including the Main Street Lending Program and the Stimulus Act Loan Program.
Employers deciding to lay off employees may have to comply with the federal Worker Adjustment and Retraining Notification Act (WARN). Certain states have analogous state laws that may have stricter requirements than the federal WARN Act. The WARN Act requires employers to provide advance notice to their workforce and communities in the event of a qualified plan closing or mass layoff.
As a result of COVID-19, the federal government, as well as state and local governments, are quickly passing legislation to provide employees with more generous leave, and employers are scrambling to be compliant with the fast-changing requirements.
For example, the Families First Coronavirus Response Act (FFCRA) requires certain employers with 500 or fewer employees to provide paid leave to employees due to a number of COVID-19-related reasons. Under this programme, full-time employees receive 80 hours of paid sick leave, while part-time workers are granted paid leave equal to the average number of hours the employee works in a two-week period. Some states and cities provide more generous paid leave packages.
The FFCRA also expands the Family and Medical Leave Act (FMLA) to provide for additional qualifying reasons for leave under COVID-19. Employees are eligible for this leave so long as they have been employed for 30 days, as opposed to the 12-month, 1,250-hour requirement for other forms of FMLA leave. In addition, while other forms of FMLA leave are unpaid, the expanded leave is paid at a rate of at least two-thirds the employee’s regular rate of pay.
Managing a Remote Workforce
A significant impact of COVID-19 has been widespread remote working from home, with considerable use of the internet and all types of virtual technology. It remains to be seen whether this impact will have long-lasting effect on the workplace of the future. There is a myriad of issues associated with such changes, not the least of which are the wage and hour rules that must be observed for exempt and non-exempt employees.
Workplace Safety Issues
Whether an employer has remained open, or will reopen in the future, a lingering effect of COVID-19 will be the safety precautions to ensure that employees, customers, and third parties are safe in the workplace. The General Duty Clause requires employers to furnish a workplace that is “free from recognized hazards that are causing or are likely to cause death or serious physical harm.” Due to COVID-19, the Occupational Safety and Health Administration (OSHA) recommends that all employers develop an Infectious Disease Preparedness and Response Plan (IDPRP) and has issued numerous guidance memoranda, fact sheets, and posters to assist employers.
These emergency efforts are valiant attempts to address the economic fallout from the public health crisis. The approach is to encourage employers to keep their workforces on the payroll and, if not, provide enhanced unemployment benefits if layoffs are necessary. With the regular passage of new legislation and issuance of new guidance of almost daily, it is essential for employers to stay current to ensure compliance and avoid missed opportunities.
About The Authors
Lou DiLorenzo and Mallory Campbell both specialise in advising employers and management on all aspects of labor and employment law.
Lou DiLorenzo is the Managing Member of Bond, Schoeneck, and King ’s New York City office and is a law and practice author of the Chambers USA Regional Employment Practice Guide , Second Edition, 2019. Mallory Campbell is an Associate in that same office.