By Richard Simmons, Brian Murphy and Adam Rosenthal

Law360 (May 20, 2020, 4:25 PM EDT) --

Richard Simmons

Brian Murphy

Adam Rosenthal

This article addresses key wage and hour issues that California employers face during the COVID-19 pandemic.[1]

Employees Who Do Not Work During the Pandemic

Aside from the availability of sick pay, vacation pay and benefits, such as state disability insurance, family temporary disability insurance and unemployment insurance, employees who do not work are not entitled to pay for the time they stay home.

This is true regardless of whether the reason they are not working is due to a business closure, a furlough or layoff, a government-issued stay-at-home order, the employee's or family-member's illness, or a concern that reporting to work presents risks of exposure that an employee is unwilling to accept.

As a result, employees are not entitled to pay under the Fair Labor Standards Act or California wage and hour laws if they do not work, whether it is due to illness, child care responsibilities or because their duties can only be performed at their normal worksite, such as health care employees, agriculture workers, gardeners, and servers at restaurants and hotels.

Other laws may nevertheless impose obligations on employers to provide emergency paid sick leave or expanded family and medical leave for specified reasons (e.g., the Families First Coronavirus Response Act, or FFCRA).

Obligations to Employees Who Work at Home

Employees who do work at home during the pandemic must record and be paid for their work time. When assessing the pay obligations, it may help employers to separately consider their obligations to exempt employees who are paid a guaranteed salary and hourly nonexempt employees when analyzing their obligations.

For example, hourly employees who work while at home must record all work time, take and record their meal periods, be authorized and permitted to take their rest periods, and be paid for all work time, including any overtime.

There is no exemption from the record-keeping obligations that apply merely because work is performed at home rather than at the employer's worksite. If hourly employees work a reduced schedule during the pandemic, employers should assess whether they are eligible to utilize accrued vacation, paid time off and sick pay to supplement their hourly wages.

Exempt employees who are paid on a salary basis are subject to different rules. If employees qualify for the executive, administrative or professional exemptions under the FLSA and state laws, they are normally paid their full salary for a week in which they perform any work, subject to narrow exceptions.

As a result, if they work part of a week, but less than their normal hours, they ordinarily will be entitled to their full salary for the week. In contrast, they need not be paid a salary for a week in which no work is performed.

Moreover, if they miss some days due to personal reasons or illness, the employer may be able to charge vacation or sick pay for the days missed. In addition, while salaries cannot be reduced for partial-day absences, vacation and sick pay may be charged for partial-day absences under certain circumstances. Further, there are other exceptions to the general salary basis rules, including one applicable to initial and terminal weeks of employment.

Apart from the obligations to pay wages for work performed under the FLSA and state wage and hour laws, other obligations exist with respect to providing paid sick leave, such as those established under the California Healthy Workplace Healthy Family Act,[2] and the FFCRA. Still other obligations may exist under an employer's vacation and paid time off programs for those employers who have combined vacation and sick leave within one bank. This raises questions regarding the payment of accrued benefits at the time of a temporary furlough or layoff as contrasted with a permanent furlough or layoff.

Additional Wage and Hour Considerations

A variety of other wage and hour issues also surface in a typical workplace. These include the ongoing obligations:

• To pay employees' wages in a timely manner;[3] 
  
  
• To pay final wages;[4] 
  
  
• To furnish compliant wage statements;[5] 
  
  
• To provide business expense reimbursements;[6]
  
  
• To furnish uniforms, tools and equipment and Occupational Safety and Health Administration safety equipment under Section 9 of the Industrial Welfare Commission wage orders and the California OSHA rules; and
  
  
• To ensure that the employer meets its obligations to pay and allow employees to use vacation pay[7] and paid sick leave.[8] 

Cost-Saving Measures: Cutbacks, Rollbacks and Related Employer Actions

The economic stress that many employers face in times of financial crisis will undoubtedly lead to consideration of viable options that allow employers to conserve assets and resources while dealing with employees in a lawful manner. Many employers explore staff reductions and options that are less impactful than layoffs.

Examples of approaches that some employers explore include temporary reductions in days or hours of work, temporary reassignments to lower-paying positions, temporary pay reductions for exempt and nonexempt employees, salary deferrals, and suspensions in or elimination of pay increase, bonus and longevity award programs. Some employers also consider temporary conversion of exempt employees from their salaried positions to hourly positions with a corresponding reduction-of-hours expectation.

Each of these approaches requires careful consideration and discussion with experienced employment counsel. Employers should identify any issues raised by contractual obligations, such as individual employment agreements and collective bargaining agreements.

They must also ensure that any changes to employee compensation comport with all applicable minimum wage and exemption requirements, such as the salary level and salary basis requirements that apply under Section 13(a)(1) of the FLSA,[9] and the IWC wage orders.

When otherwise permissible, changes in pay, hours or job status must also be administered and carried out in a manner that does not unlawfully discriminate against employees in violation of state or federal discrimination laws, such as Title VII of the Civil Rights Act, the California Fair Employment and Housing Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the equal pay laws.[10]

Use of Independent Contractors

It is not unusual for employers to consider opportunities to save costs by classifying workers as independent contractors rather than employees. Typically, these ideas are prompted by knowledge that the costly obligations owed to employees do not apply to independent contractor relationships.

For example, independent contractors are not entitled to the wage and hour protections that extend to employees, such as the minimum wage, overtime pay, expense reimbursement, reporting time pay and other protections afforded employees by the IWC wage orders and the FLSA.

Likewise, independent contractors are normally not entitled to workers' compensation, unemployment insurance or employee benefits, and are not subject to payroll tax withholding or employer Federal Insurance Contributions Act contributions. The Coronavirus Aid, Relief and Economic Security Act extends unemployment insurance benefits to some individuals ordinarily excluded from unemployment insurance.

Any temptation employers may have to temporarily rehire or reclassify workers as independent contractors should be carefully reviewed with legal counsel in advance. Many government agencies have launched aggressive crackdowns against employers who misclassify workers as independent contractors.

Litigation in this area has also increased due to the difficult standards that apply under the FLSA and even more difficult standards established by case law and new legislation in California.[11] In short, any attempt to solve economic concerns by shortsightedly classifying workers who do not qualify as independent contractors may increase rather than solve an employer's problems.

Use of Volunteers

Both state and federal laws establish significant standards that limit the circumstances where individuals can volunteer services, particularly where the individuals have previously worked or continue to work as employees. For example, as a general rule, the FLSA does not allow employees to volunteer to perform the same services they are employed to perform.[12]

It is generally inadvisable to classify individuals as volunteers and utilize their services without pay simply because they are willing, or employers face financial challenges. Individuals who are found to be employees must be paid no less than the minimum wage. 

COVID-19 FAQs on Laws Enforced by the California Labor Commissioner

The California Department of Industrial Relations, or DIR, has attempted to take a proactive approach to advise the public of its enforcement positions with respect to the laws it enforces and the impact of COVID-19. The fact that the DIR, like the Centers for Disease Control and Prevention and other agencies, regard the virus as a disease is noteworthy because of the implications it creates regarding the use of paid sick leave under the California Healthy Workplace Healthy Family Act.[13]

In the DIR's memorandum,[14] the DIR presented 10 FAQs. For purposes of clarity, this section unpacks the FAQs to identify what requirements they address and where they may be ambiguous.

1. Can an employee use California paid sick leave due to COVID-19 illness?

The answer is yes. If an employee has paid sick leave available, the employer must provide such leave and compensate the employee under California paid sick leave laws.[15]

The FAQ also explains that paid sick leave can be used for absences due to:

• Illness;
• The diagnosis, care or treatment of an existing health condition; or
• Preventative care for the employee or the employee's family member.

It does not explain how the term "family member" is defined in the statute.

Preventative Care

The FAQ offers insights regarding the term "preventative care." It states that such care may include "self-quarantine as a result of potential exposure to COVID-19 if quarantine is recommended by civil authorities." In addition, there may be other situations where an employee may exercise the right to take paid sick leave, or an employer may allow paid sick leave for preventative care, for example, where there has been exposure to COVID-19 or where the worker has traveled to a high-risk area.

The question posed expressly refers to the use of California paid sick leave. Neither Question 1 nor anything in the FAQs indicates whether the DIR focused solely on the paid sick leave required by California Labor Code Sections 245–249, which generally equals the greater of three days or 24 hours of paid leave, or the portion of paid sick leave or paid time off benefits that employers offer that exceeds the minimum dictated by state law.

Furthermore, while the FAQ addresses the use of paid sick leave required by the state law, it does not expressly address the availability of paid sick leave under local ordinances, which often require a greater amount of paid sick leave.

2. If an employee exhausts sick leave, can other paid leave be used?

The answer is yes, if an employee does not qualify to use paid sick leave, or has exhausted sick leave, other leave may be available. If there is a vacation or paid time off policy, an employee may choose to take such leave and be compensated provided that the terms of the vacation or paid time off policy allow for leave in this circumstance.

3. Can an employer require a worker who is quarantined to exhaust paid sick leave?

Interestingly, the FAQ states that an

employer cannot require that the worker use paid sick leave; that is the worker's choice. If the worker decides to use paid sick leave, the employer can require they take a minimum of two hours of paid sick leave. The determination of how much paid sick leave will be used is up to the employee.

While the response to the question ends there, it can be argued that the response allows employees the choice to use paid sick leave, including crude amounts that are greater than the minimum required by California Labor Code Sections 245–249. Some employers may resist this interpretation based on the view that the DIR can only address the portion of an employer's paid sick leave or PTO program that covers the paid sick leave mandated by state law and does not govern any excess that an employer voluntarily chooses to offer.

There is language in earlier FAQs issued by the DIR,[16] that support such an argument. Despite the availability of such arguments, it is anticipated that most employees who are quarantined for 14 or more days will prefer to use their accrued paid sick leave and other benefits, such as paid time off, to receive income while they are gone.

Of course, employers must consider the FFCRA, which imposes limitations on when an employer can require an employee to use paid sick leave under either the amended Family and Medical Leave Act or newly created Emergency Paid Sick Leave Act.

4. What options do I have if my child's school or daycare closes for reasons related to COVID-19?

The response to this question is convoluted and indicates that employees should discuss their options with their employers. It then identifies some rules that may come into play.

For example, the FAQ reports that there may be paid sick leave or other paid leave that is available to employees. For instance, employees at work sites with 25 or more employees may be provided up to 40 hours of leave per year for specific school-related emergencies, such as the closure of a child's school or daycare by civil authorities.

These rules are in the Family School Partnership Act.[17] Whether the leave available under the California Family School Partnership Act is paid or unpaid depends on the employer's paid leave, vacation or other paid time off policies.

Employers may require employees to use their vacation or paid time off benefits before they are allowed to take unpaid leave, but cannot mandate that employees use paid sick leave. Once again, the FAQ does not distinguish between paid sick leave mandated by the California Labor Code and sick leave that exceeds the legal mandates.

The FAQ does indicate that a parent may choose to use any available paid sick leave to be with his or her child as preventative care. That raises the same issue. Again, employers must consider their obligations under the FFCRA.

5. Can an employer require a worker to provide information about recent travel to countries considered to be high-risk for exposure to the coronavirus?

The DIR confirmed that an employer can. Specifically, the FAQ states that employers can request that employees inform them if they are planning to travel or have traveled to countries considered by the CDC to be high-risk areas for exposure to the coronavirus.

It further explains, however, that employees have a right to medical privacy. As a result, employers cannot inquire into areas of medical privacy.

6. Is an employee entitled to compensation for reporting to work and being sent home?

The FAQ states that the reporting time pay rules may apply. Under those rules, if an employee reports for a regularly scheduled shift but is required to work fewer hours or is sent home, the employee must be compensated for at least two hours, or no more than four hours, of reporting time pay.

For example, a worker who reports to work for an eight-hour shift and only works for one hour and is sent home must receive four hours of pay, one for the hour worked and three as reporting time pay so that the worker receives pay for at least half of the expected eight-hour shift.

7. If a state of emergency is declared, does reporting time apply?

The response indicates that reporting time pay does not apply when operations cannot commence or continue when recommended by civil authorities. This means that reporting time pay applies "under a state of emergency, unless the state of emergency includes a recommendation to cease operations."

The FAQ does not identify the specific exceptions to the reporting time pay rules set forth in Section 5 of the wage orders in the following situations:

• If operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities;
  
  
• If public utilities fail to supply electricity, water or gas, or there is a failure in the public utilities, or sewer system;
  
  
• If the interruption of work is caused by an act of God or other cause not within the employer's control; or
  
  
• If an employee on paid standby status is called to perform assigned work at a time other than the employee's scheduled reporting time.

8. If an employee is exempt, are they entitled to a full week's salary for work interruptions due to a shutdown of operations?

Although most of the response to this question appears correct, some portions are ambiguous and questionable. The response begins by noting that employees are exempt if they are paid at least the minimum required salary (currently $1,040 a week under California law) and meet the other qualifications for exemption (e.g., spend more than half their work time on exempt activities).

The response then notes that federal regulations require that employers pay an exempt employee "performing any work during a week their full weekly salary if they do not work the full week because the employer failed to make work available." It also notes a separate rule providing that an exempt employee who performs no work at all during a week may have his or her weekly salary reduced.

Following these general statements, the response indicates that deductions from salary for absences of less than a full day for personal reasons or for sickness are not permitted. If an exempt employee works any portion of a day, there can be no deduction from salary for a partial day absence for personal or medical reasons.

On the other hand, federal regulations allow partial-day deductions from an employee's sick leave bank so that the employee is paid for sick time by using accrued sick leave. If an exempt employee has not yet accrued any sick leave or has exhausted all of the accrued sick leave balance, there can be no salary deduction for a partial day absence.

The response also states that deductions from salary may also be made if the exempt employee is absent from work for a full day or more for personal reasons other than sickness and accident, so long as work was available for the employee, had the employee chosen to work.

9. What protections do employees have if they suffer retaliation for using their paid sick leave?

The answer to this question emphasized that several laws protect employees from retaliation if they suffer adverse action for exercising their labor rights, such as using paid sick leave or time off related to a specified school activity, as outlined in the answer to Question 4.

Interestingly, the answer encourages employers and employees to discuss what unpaid or paid leave options may be available if the employee chooses not to use available paid sick leave or has no other paid leave available. The answer adds that unlawful retaliation would be illustrated by making immigration-related threats against employees who exercise their rights under these laws.

10. What practical issues are involved if a party to an action filed with the labor commissioner's office seeks an accommodation to participate remotely due to the coronavirus?

The answer to this question states that accommodations can be made and that such requests should be emailed to the district office where the claim has been filed. They will be evaluated on a case-by-case basis.

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Richard J. Simmons, Brian D. Murphy and Adam R. Rosenthal are partners at Sheppard Mullin Richter & Hampton LLP.

This article is a Lexis Practice Advisor® excerpt republished from Castle Publications' ebook titled "Employer's Guide to COVID-19 and Emerging Workplace Issues" by Simmons, Murphy and Rosenthal. 

Lexis Practice Advisor is a comprehensive practical guidance resource that includes practice notes, checklists, and model annotated forms drafted by experienced attorneys to help lawyers effectively and efficiently complete their daily tasks. For more information on Lexis Practice Advisor or to sign up for a free trial, please click here. Lexis is a registered trademark of RELX Group, used under license.

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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] For more guidance on a wide variety of COVID-19 legal issues, see Coronavirus (COVID-19) Resource Kit. For tracking of key federal, state, and local COVID-19-related Labor & Employment legal developments, see Coronavirus (COVID-19) Federal and State Employment Law Tracker. For tracking of key federal, state, and local non-coronavirus-related Labor & Employment legal developments, see Labor & Employment Key Legal Development Tracker.

[2] Cal. Lab. Code §§ 245–249.

[3] Cal. Lab. Code § 204.

[4] Cal. Lab. Code §§ 201–203.

[5] Cal. Lab. Code § 226.

[6] Cal. Lab. Code § 2802.

[7] Cal. Lab. Code § 227.3.

[8] Cal. Lab. Code §§ 245–249.

[9] Cal. Lab. Code § 515.

[10] See, e.g., Cal. Lab. Code § 1197.5 and FLSA § 6(d).

[11] See Dynamex Operations West, Inc. v. Superior Court , 4 Cal. 5th 903 (2018), California Assembly Bill 5 (AB 5) (2019), and Cal. Lab. Code §§ 226.8 and 2750.3et seq.

[12] See DOL Guidance, COVID-19 and the Fair Labor Standards Act Questions and Answers.

[13] Cal. Lab. Code §§ 245-249.

[14] Coronavirus Disease (COVID-19) – FAQs On Laws Enforced By The California Labor Commissioner's Office.

[15] These laws are set forth in Cal. Lab. Code §§ 245–249 and, to a lesser extent, Cal. Lab. Code §§ 233–234.

[16] New Questions Concerning the Paid Sick Leave Law Updated March29, 2017.

[17] Cal. Lab. Code § 230.8.

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