The COVID-19 crisis has hit employers hard this week with shutdowns and quarantines sweeping the country.  In this newsletter, we lay out various options that employers can consider for their workforce if they need to slow down or close due to COVID-19.

Working from Home

Remote work is a good option for office-based companies who close their physical offices during the COVID-19 outbreak.  We have work-from-home policy templates for any clients who might need them.  Please contact us if you would like to adopt a work-from-home policy.

Reduced Hours

Another option, short of laying off employees, is to reduce employees’ hours.  Reduced hours are straightforward for hourly employees.  Hourly employees can be paid for hours actually worked on their reduced schedule. 

For salaried/exempt employees, employers must pay the employee their full salary if they work any hours at all in a given week.  If you need to furlough salaried employees for a period of time, this should be done on a workweek basis, and you should ensure that the employee does not do any work (including checking email) for the entire week.

Employers can also formally lower a salaried employee’s salary or convert exempt employees to a part-time schedule (for example, 60% hours for 60% pay) or convert exempt employees to hourly employees.  These changes should be clearly communicated and documented in accordance with state laws to avoid any questions of unpaid wages down the road.

Layoffs and Unemployment

Many businesses will need to lay off employees and rely on unemployment to get through this crisis.  Employers have a number of options they can consider for layoffs, partial layoffs, and unemployment:

  1. Permanent layoff and unemployment. Terminated employees can apply for unemployment.  When laying off employees, be sure to pay any remaining earned wages and accrued, unused vacation or PTO.  Sick leave does not need to be paid out unless it is part of a combined PTO policy.  Be sure to give Massachusetts employees the required DUA form for terminated employees, available here.  Massachusetts DUA is currently processing claims in 21-28 days, so employers should encourage their terminated employees to apply for unemployment without delay.  Other states, utilize other forms, contact us if you need us to send you the required forms. 
  2. Emergency Expansion of Unemployment Benefits. The Massachusetts legislature is currently working on several emergency expansions to unemployment, including:
    • Emergency regulations to allow employees to go on unemployment if their employer is temporarily closed due to COVID-19. DUA has not yet released the details, but it is an option to consider for employers who need to temporarily close and plan to bring their employees back as soon as they can reopen.  
    • Waiving the one-week waiting period for unemployment benefits.
    • Making unemployment benefits available to workers who are quarantined or need to leave work permanently due to COVID-19.

These regulations have not been adopted yet, but we anticipate seeing these changes shortly.

  1. Unemployment and severance. Unemployment covers 50% of a worker’s wages, up to a weekly max of $823.  If employers wish to pay their employees something to bridge the gap, they can either pay employees a lump sum upfront or rolling severance payments.  In Massachusetts, severance payments ordinarily reduce/disqualify individuals from unemployment benefits unless employers require employees to sign a waiver in exchange for the severance.  A few other states offer a similar exemption. Many do not.  We have simple waiver forms that employers can use if needed.
  2. Unemployment and reduced hours. Unemployment can also be used to bridge the gap for employees on reduced hours. Employees can earn up to 1/3 of their weekly unemployment benefit in part-time work.  After that, any additional wages are deducted from unemployment dollar-for-dollar.  Although this option does not restore 100% of an employee’s wages, it does help, especially if their hours are significantly reduced.
  3. Reduced Hours and WorkShare. WorkShare is a Massachusetts DUA alternative to a layoff. Employers develop a plan to reduce hours across the board by 10-60% (either for the entire company or specific divisions / job categories).  DUA then provides unemployment benefits for the balance of hours.  Employers must continue to provide the same health insurance and retirement benefits that they provided prior to the reduction in hours.  Employers interested in this option can apply here.  

WARN Act and Mass Layoffs

Depending on the size of your company and the magnitude of the layoffs, mass layoffs may trigger responsibilities under the federal Worker Adjustment and Retraining Notification (WARN) Act or state equivalents. 

The federal WARN Act applies to companies with 100 or more employees.  Employers are required to give 60 days’ notice to employees before a layoff that affects 50 or more employees at a single work-site.  Employees with less than 6 months of service or part-time employees who work fewer than 20 hours per week are not included in this count.  Temporary layoffs of less than six months do not trigger the WARN Act.

There is also an exception under the WARN Act for “unforeseeable business circumstances,” which include business circumstances that were not reasonably foreseeable 60-days prior and natural disasters.  In the case of an unforeseen business circumstance, employers must provide as much notice as practicable and provide a statement explaining the circumstances of why more extensive notice was not provided.

The Department of Labor has not yet weighed in on whether COVID-19 will be considered an unforeseeable business circumstance.   

In addition to the federal WARN Act, several states have their own versions that affect smaller companies.  Most state WARN Acts include similar exceptions for unforeseen business circumstances and faltering companies.  These are some of the state laws in the most common states for our clients:

  • Massachusetts: Employers with 50 or more employees who are closing a facility or significantly reducing their workforce must notify the Commonwealth.
  • New York: Employers with 50 or more employees who are facing a mass layoff or significant reduction in hours must give employees at least 90 days’ written notice.   
  • California: Employers with 50 or more employees who are facing a layoff of 75 or more employees must give employees at least 60 days’ notice.
  • Illinois: Employers with 75 or more employees must give workers and state and local government officials 60 days’ notice prior to a mass layoff.

If you are facing a layoff that might trigger federal or state WARN laws, please contact us and we can discuss the situation on a case-by-case basis.

Federal Emergency Paid Sick Leave / Paid Family and Medical Leave

On Saturday, March 14, the U.S. House of Representatives passed a bill that would require emergency paid sick leave and paid family and medical leave for employers with 500 or fewer employees.  Under the current bill, companies may get this paid leave reimbursed through federal tax credits.  President Trump has indicated that he supports the bill and will sign it if it gets to his desk.  However, the bill is currently under consideration with the Senate, and it is not clear whether it will become law.  We are monitoring the bill closely and will update our clients as soon as we know more.

Conclusion

This situation is evolving rapidly and we will do everything we can to keep our clients informed of any updates that might affect them or their workforce.  Please do not hesitate to reach out if you need our help during this crisis.