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Post-COVID-19 Employment Litigation is Coming: How Can Employers Avoid It?

Written by: Charla Bizios Stevens

Published in NEHRA News (6/18/2020)

In mid-March the work world as we know it changed due to the COVID-19 emergency orders.   Many employers were forced to make immediate decisions about things previously unknown to them like furloughs, wage reductions, providing Personal Protective Equipment, applying for loans to cover payroll, and ensuring the safety of essential workers.  Now the focus is on return to work plans and providing a safe place for employees, customers, and vendors in order to return to something as close as possible to “business as usual.”

It is reasonable to conclude that as businesses reopen, people will look for ways to recoup losses, financial and otherwise, and to assess blame or responsibility.  Although there is no playbook in the United States for life and litigation after a global pandemic, one can look to past economic downturns to forecast the types of claims employers may face in the not too distant future.  We can also provide some suggestions about how companies might avoid, or at least effectively respond to claims.

As of April 21, while forecasting “The Coming Tsunami of Employment-Related COVID-19 Litigation” in an article for Law.com, author Christopher R. Dyess recounted recent trends:

Indeed, the business community has already seen an initial wave of litigation coming out of the COVID-19 crisis, including cases involving: (1) a maker of hand sanitizer making false statements about the sanitizer’s effectiveness against COVID-19. David et al. v. Vi-Jon, Case No. 20-cv-00424 (S.D. Cal. filed March 5, 2020); (2) Uber and Lyft drivers seeking a declaration that they are employees and not independent contractors, making them eligible for sick pay. See Verhines v. Uber Technologies, Case No. 20-583684 (Cal. Super. Ct. filed March 12, 2020); Rogers v. Lyft, Case No. 20-583685 (Cal. Super. Ct. filed March 12, 2020); (3) retailers price gouging high-demand items such as toilet paper and hand sanitizer. See Armas v. Amazon.com, Case No. 104631782 (Fla. 11th Cir. Ct. filed March 10, 2020); (4) a New York fitness chain charging monthly fees after the gym closed because of the pandemic. See Namorato v. Town Sports Int’l, Case No. 20-cv-02580 (S.D.N.Y. filed March 26, 2020); and (5) ticket reseller StubHub refusing to refund money for cancelled events. See McMillian v. StubHub, Case No. 20-cv-00319 (W.D. Wis. filed April 2, 2020).

What should employers expect to see in the way of future employment-related litigation, and how can they best prepare to respond?

Allegations of Discriminatory Layoffs or Calls to Return to Work

Whenever businesses are considering reorganization or down-sizing, decisions should be made based on objective business-related criteria and should be documented appropriately.  Although there are no specific criteria for such decisions in the absence of a collective bargaining agreement, it is critical that some criteria be employed and that they govern the decisions being made. Appropriate factors might include seniority, performance, skills, and salary level.  An employer’s assumption that an employee might be less available, valuable, or interested in working because he or she has small children or elderly parents at home is not appropriate.  Although such an assumption may not be based on an impermissible factor such as age or gender, it could very well have a disparate impact on members of a certain protected group.  For that reason, businesses should review these decisions carefully looking for any signs of disparate impact on particular groups of employees.  The same process should also be employed when making decision about who will return to work and when, especially if the ramp up to full employment is slow and unpredictable.

Wage and Hour Claims

In a world of furloughs, reduced hours, reduced pay, and an increasing number of non-exempt employees working remotely, the potential for missteps by employers increases exponentially.  The most important defense against wage claims is meticulous recordkeeping. A few tips to remember:

  • Employees on furlough may not work (or be required to work) at all. Sending an exempt employee emails and expecting an answer, or telephoning to ask work-related questions will  trigger the responsibility to pay that employee his or her  entire salary for the week or pay period (depending upon the state in which they are employed).  Having an administrative assistant check email or attend Zoom meetings after hours is work time for which they should be paid their regular hourly rate.  If this work pushes them over 40 hours, they will be entitled to overtime.
  • Take care not to destroy the exemption for a previously exempt employee. In order for an employee to be properly classified as exempt, his or her job must meet both a duties test and a salary test.  Reducing a salaried employees’ pay below $35,568 a year either due to a reduction in work, or an across the board salary adjustment to save on payroll, will result in that employee no longer being exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act.  Similarly, a reduction in force requiring a previous management role to morph into one that requires substantial non-management work may also defeat the exemption, thus obligating the company to pay overtime to an executive who routinely works 50 hours per week.
  • It is entirely likely that the recordkeeping by non-exempt employees of their exact hours of work and break times became lax when they have been working from home. If the records are not accurate or look “too perfect to be honest”—such as an employee working from 8 am to 4 pm every day with precisely an hour for lunch between noon and 1 pm—those records will likely be dismissed by a regulatory authority such as the USDOL.  It is the employer’s legal responsibility to maintain accurate records.  As a result, managers should be charged with the duty to account for the time records of all of their direct reports.

 

Employees who lose their jobs have significant incentive to file wage claims, especially in states like Massachusetts, which provide for the automatic tripling of damages and awards of attorney’s fees against businesses and their owners when court action is needed to enforce payment.

Health and Safety Claims

Businesses can expect to see different kinds of claims related to the failure to  maintain a safe workplace or safe environment for visitors.  These would likely start with allegations that a business failed to follow appropriate safety guidelines issued by the Occupational Safety & Health Administration (OSHA), Centers for Disease Control & Prevention (CDC), or equivalent state and local authorities.  OSHA, CDC, and the states have all issued guidelines, many targeted to specific industries, to minimize the risk of spread of COVID-19.  These guidelines are considered the minimally acceptable level of care to be taken by businesses.  Failure to follow these could result in worker’s compensation claims by employees or negligence claims by third parties.  A careful return to business plan with protocols and policies appropriate to the location and nature of the business are a critical defense against negligence claims.

Many of these employment-related claims will be difficult to prove, and enforcement agencies may be more lenient given the extraordinary nature of the pandemic. However, the cost and disruption of having to defend such claims could be crippling to a company already facing the challenges associated with a return to some semblance of normal business activity.  For these reasons, employment decisions should be made carefully and with the mitigation of these risks in mind.

Charla Stevens is a director at McLane Middleton and Chair of the firm’s Employment Law Practice Group.  She can be reached at (603) 628-1363 or [email protected].

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