Category: Labor & Employment

EEOC Issues ADA and Title VII Guidance for Employers on COVID-19

The Equal Employment Opportunity Commission (EEOC) recently hosted a webinar in which the agency answered questions about the applicability of the Americans with Disabilities Act (ADA) and Title VII to COVID-19-related employment actions.  This Q&A supplemented earlier guidance posted by the EEOC.

This post summarizes the guidance and takeaways from the EEOC webinar.

  • The EEOC updated its previously published guidance entitled “Pandemic Preparedness in the Workplace and the Americans With Disabilities Act” to provide information and examples regarding COVID-19. This new guidance confirms that COVID-19 constitutes a “direct threat” and a significant risk of substantial harm would be posed by having someone with COVID-19, or symptoms of it, present in the workplace.
  • Employers should follow the EEOC guidance in conjunction with the guidelines and suggestions made by the CDC and state/local health authorities.
  • The guidance also answers common employer questions about the COVID-19 pandemic, such as:

Q:     How much information may an employer request from an employee who calls in sick in order to protect the rest of its workforce during the COVID-19 pandemic?

A:    ADA-covered employers may ask such employees if they are experiencing symptoms of the pandemic virus such as fever, chills, cough, shortness of breath, or sore throat. Employers must maintain all information about employee illness as a confidential medical record in compliance with the ADA. Employers generally may not ask these questions of employees who are teleworking since they are not entering the workplace and do not pose a threat to others.

We note, however, that if an employee recently started teleworking, employers may want to ask the employee if they exhibited symptoms of COVID-19 before starting telework, so the employer can inform those with whom the employee had been in close contact about the potential exposure.

Q:     What if an employee refuses to answer COVID-19 related questions by the employer?

A:    The ADA allows employers to bar an employee’s physical presence in the workplace if he or she poses a threat to others. Employers should ask for the reason behind the employee’s refusal and reassure the employee if the employee is hesitant to provide this information.

Q:    When may an employer take an employee’s temperature during the COVID-19 pandemic?

A:    Generally, taking an employee’s temperature is a medical examination under the ADA. Because the CDC and state/local health authorities have acknowledged community spread of COVID-19, employers may take employees’ temperature. However, employers should be aware that some people with COVID-19 do not have a fever, while some people with a fever do not have COVID-19.

Employers, however, are well-advised to first consult with counsel to ensure the administration of these tests stays within the guidance and does not otherwise violate applicable law.

Q:    Can an employer ask COVID-19 related questions about an employee’s family members? 

A:    This unnecessarily limits the inquiry. A better question is whether the employee has had contact with anyone diagnosed with COVID-19 or who was showing symptoms of COVID. A general question like this is more sound. The Genetic Information Nondiscrimination Act (GINA) prohibits employers from asking employees medical questions about an employee’s family members.

Q:    How are employers supposed to keep medical information of employees confidential while teleworking?

A:     The ADA requires that medical information be stored separately away from other personnel files and employee information. A supervisor who receives this information while teleworking should follow normal company procedures to store this information. If they cannot follow the procedures for whatever reason, they should make every effort to safeguard the information from disclosure (for example, do not leave a laptop open or accessible to others; do not leave notepads with information around the home, etc.).

Q:    What are an employer’s ADA obligations when an employee says he has a disability that puts him at a greater risk of severe illness if he contracts COVID and therefore asks for a reasonable accommodation?

A:    The CDC has identified certain conditions (for example, lung disease) that put certain people at a higher risk for severe illness if COVID-19 is contracted. Thus, this is clearly a request for a reasonable accommodation and a request for a change in the workplace. Because employers cannot grant employees reasonable accommodations for disabilities that they do not have, employers may verify that the employee has a disability, what the disability is, and that the reasonable accommodation is necessary because the disability may potentially put the individual at a higher risk for severe illness due to COVID-19.

There may also be a situation in which the employee’s disability is exacerbated by the current situation. The employer may verify this as well. Aside from requesting a doctor’s note, other options to verify an employee’s disability may be to request insurance documents or their prescription. An employer may want to provide a temporary reasonable accommodation pending receipt of the documentation.

Q:    If an employer grants telework to employees with the purpose of slowing down/stopping COVID-19 – after the public health measures are no longer necessary, does the employer automatically have to grant telework as a reasonable accommodation to every employee with a disability who wishes to continue this arrangement?

A:    No. Anytime an employee requests a reasonable accommodation, the employer has the right to understand and evaluate the disability related limitation and make a determination on the request. After the pandemic, a request to telework does not have to be granted if working at the worksite is an essential function of the job in normal circumstances (i.e. not during a pandemic). The ADA never requires an employer to limit the essential functions of a position, and just because an employer did this during the pandemic does not mean an employer has to permanently change the essential functions of a position, and is not an admission that telework is a feasible accommodation or that telework does not place an undue hardship on the employer.

The guidance further addresses common questions related to discrimination and harassment under Title VII, such as:

Q:     May an employer decide to layoff or furlough a pregnant employee who does not have COVID-19 or symptoms solely based on the CDC guidance that pregnant women are more likely to experience severe symptoms and should be monitored?

A:     No, because pregnant employees are protected under the Pregnancy Discrimination Act of Title VII.

Q:    May an employer exclude from the workplace an employee who is 65 or older and who does not have COVID, solely because he or she is in an age group that is at higher risk for severe illness as a result of COVID?

A:    No, age based actions are not permitted. The Age Discrimination in Employment Act prohibits discrimination against those who are 40 or older.

Q:    May an employer single out employees based on national origin and exclude them from the workplace due to concerns about possible COVID-19 transmission? May employers tolerate a hostile work environment based on an employee’s national origin or religion because others link it to the transmission of COVID-19?

A:    No, because Title VII prohibits national origin discrimination. It does not matter that it is linked to COVID-19. Employers should remind employees of anti-discrimination and anti-harassment policies and also should ensure that they are not taking employment actions based on an employee’s protected class(es).

  • An employer may make inquiries that are non-disability related to identify potential non-medical reasons for an employee’s absence or future absence. For example, an employer may ask a “yes” or “no” question that asks if the employee or someone in his or her household falls within the categories identified by the CDC for being at higher risk for severe illness if COVID-19 is contracted (such as pregnancy or being over the age of 65).
  • An employer may also screen job applicants for symptoms of COVID-19 after making a conditional job offer, as long as it does so for all entering employees in the same type of job.
  • While employers may require doctors’ notes certifying their fitness for duty before returning to work, as a practical matter, doctors and other health care professionals may be too busy during the pandemic outbreak to provide fitness-for-duty documentation. Therefore, new approaches, such as requesting an employee’s prescription, may be necessary.

This is a challenging time and events are changing rapidly. EEOC guidance and interpretation of what is permissible under the ADA and Title VII is evolving and may change as circumstances develop.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

For more employer guidance from Gov’t Agencies amid the COVID-19 pandemic, see the National Law Review dedicated Coronavirus News section.

SBA Loans Under the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on Friday March 27, 2020, introduces the Paycheck Protection Program (the “PPP”) with $349 billion in funding and the goal of preventing job loss and small businesses failure due to losses caused by the COVID-19 pandemic.  The new PPP loan program is available for eligible small businesses, including sole proprietors, and non-profits, veterans organizations and tribal business concerns, to provide a forgivable loan to cover payroll and other costs.  Additionally, the CARES Act greatly expands the Economic Injury Disaster Loan Program (the “EIDL” Program) with $10 billion of additional funding for the SBA.

Businesses need to understand both programs as well as the additional financial and other relief that may be available under the CARES Act in order to make short- and long-term planning decisions.  The CARES Act provides assistance to many businesses that may not meet the customary small business thresholds.  Given the various qualification criteria, the programs and incentives enacted under the CARES Act must be evaluated separately for each business, considering industry, legal requirements and financial and other contractual commitments during this challenging time.

Paycheck Protection Program (“PPP”)

PPP loans are 100% federally guaranteed loans for small businesses intended for companies to maintain their payroll levels and allow partial loan forgiveness, as described below.  The loans are available until June 30, 2020 for eligible companies to cover the cost of:

  • Payroll
  • Health care benefits and related insurance premiums
  • Employee compensation (with some limitations for employees with salaries over $100,000 and exclusions for employees based outside the U.S.)
  • Mortgage interest obligations (but not principal)
  • Rent and utilities
  • Interest on debt incurred prior to the loan

The maximum amount of a PPP loan available to each borrower is equal to the lesser of: (a) $10 million, or (b) 2.5 x its average total monthly payroll costs, as defined in the Act.  Unlike most typical SBA loans, the PPP Loans are unsecured loans requiring no collateral, no personal guarantee, and no showing that credit is unavailable elsewhere.  The PPP loan, to the extent not forgiven, has a maximum 10-year term and the interest rate may not exceed 4%.  PPP loans will be made available through SBA-approved lenders, who must offer a 6-12 month deferment on payment of principal, interest, and fees.

A borrower of a PPP loan is eligible for loan forgiveness for amounts spent during the 8-week period after the origination date, subject to proper documentation, on (i) rent, (ii) defined payroll costs, (iii) mortgage interest, and (iv) utilities, not to exceed the principal of the loan.  The amount of the PPP loan forgiveness may be reduced if the borrower reduces the number of employees or salaries and wages (for employees with annual salaries less than $100,000) during the 8-week period following the origination of the loan.  However, this reduction penalty doesn’t apply to the extent the borrower restores their workforce count and salaries/wages by June 30, 2020.

To be eligible for a PPP loan, a company must be either (i) a small business concern under the SBA regulations, or (ii) a business concern, nonprofit organization, veterans’ organization, or Tribal business concern that employs not more than 500 employees (or the number of employees in the size standard applicable to the borrower’s industry, which for some industries is up to 1500 employees).  Businesses in the Accommodation and Food Services Industry with more than 500 employees in multiple locations can avail themselves of the PPP loan program as long as they have 500 or fewer employees per location.

Notably, the CARES Act waives the SBA’s affiliation rules for determining PPP program eligibility for certain specific categories of businesses, including businesses in the Accommodation and Food Services Industry, businesses operating as a franchise that are assigned a franchise identifier code in the SBA Franchise Directory (available here), and businesses that receive financial assistance from a licensed Small Business Investment Company.  Given this limited waiver, subject to guidance expected from the SBA, the remainder of eligible businesses appear to be subject to the SBA’s affiliation rules.  These SBA rules would aggregate the number of an applicant’s full-time and part-time employees with those of their domestic and foreign affiliates.  Identifying which companies qualify as “affiliates” can be a fact-intensive inquiry under the SBA’s regulations, but the touchstone of affiliation is the ability to control a business concern.  Forthcoming guidance from the SBA will hopefully clarify the application of the SBA’s affiliation rules to PPP loan applicants.

Eligible companies must have been in operation on February 15, 2020 and must have, as of that date, had employees for whom the entity paid salaries and payroll taxes, or paid independent contractors. Additionally, when applying for a PPP loan, a borrower must certify that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient and acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.

Economic Injury Disaster Loan (“EIDL”) Program

Another option for small businesses is the SBA’s existing EIDL Program, which was expanded by the CARES Act and provides for longer-term loans with favorable borrowing terms.  Companies in all 50 states, District of Columbia, and some U.S. territories are eligible for EDIL loans relating to economic injury caused by the COVID-19 pandemic.  While there are no loan forgiveness provisions applicable to EIDL loans, companies that have already applied for or received EIDLs due to economic injury attributable to the COVID-19 pandemic can seek to refinance their EIDL loans under the PPP to take advantage of the PPP’s loan forgiveness provisions.  Additionally, while companies may be eligible for loans under both programs, they are unable to seek recovery under the EIDL loan for the same costs that are covered by a PPP loan.

The CARES Act expanded EIDL eligibility for the period between January 31, 2020 and December 31, 2020, to include any business with not more than 500 employees, any individual operating under a sole proprietorship or as an independent contractor, and any cooperative, ESOP or tribal small business concern with not more than 500 employees. Subject to guidance from the SBA, these applicants would also appear to still be subject to the SBA’s affiliation rules governing financial assistance programs.  Entities previously eligible to receive SBA EIDLs, including small business concerns, private nonprofit organizations and small agricultural cooperatives, remain eligible for such loans under the more favorable terms authorized by the CARES Act.

To qualify for an EIDL under the CARES Act, the applicant must have suffered “substantial economic injury” from COVID-19.  EIDL loans under the CARES Act are based on a company’s actual economic injury determined by the SBA (less any recoveries such as insurance proceeds) up to $2 million.  EIDL loans may be used for payroll and other costs as well as to cover increased costs due to supply chain interruption, to pay obligations that cannot be met due to revenue loss and for other uses.  The interest rate on EIDL loans is 3.75% fixed for small businesses and 2.75% for nonprofits.  The EIDL loans have up to a 30-year term and amortization (determined on a case-by-case basis).

The CARES Act also permits applicants to request an advance of up to $10,000 to pay allowable working capital needs; the advance is expected to be paid by the SBA within 3 days.  This advance is essentially a grant and is not required to be repaid, even if the application is denied, but the amount of the advance must be deducted from any loan forgiveness amounts under a PPP loan, described above.

EIDLs under the CARES Act do not require personal guarantees for loans up to $200,000, but do require personal guarantees by owners of more the 20% of the borrower for loans in excess of that amount.  The CARES Act waives the requirement for the borrower to demonstrate that it is unable to obtain credit elsewhere.  However, unless changed by the SBA, it appears that the requirement for collateral on EIDL loans over $25,000 would still apply, and, in processing a borrower’s application, the SBA must make a determination that the applicant has the ability to repay the loan.  Further, the SBA can approve a loan based solely on the credit score of the applicant or other means of determining the applicant’s ability to repay the loan, without requiring the submission of tax returns, which should expedite approval of EIDLs during the covered period.

Given the very favorable terms of these two SBA loan programs and the potential for loan forgiveness under PPP loans, eligible small businesses who have been economically impacted by the COVID-19 pandemic should strongly consider taking advantage of these loan programs.  Applications for EIDL loans should be submitted directly to the SBA, while PPP loans will be available from SBA-approved lenders.

For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the CDC and the World Health Organization.

© 2020 Foley & Lardner LLP

For more on the COVID-19 CARES Act, see the National Law Review Coronavirus News page.

OSHA Issues Guidance on Preparing for COVID-19

1) OSHA has issued a comprehensive document “Guidance on Preparing Workplaces for COVID-19.”

That Guidance categorizes employers under “Very High Risk,” “High Risk,” “Medium Risk,” and “Lower Risk,” categories.  The employer should first determine under which category the employer falls.  Then the employer should further review the Guidance to determine which “engineering,” “administrative,” “work practice,” and “Personal Protective Equipment” (PPE) measures apply to their company and implement those measures, called “controls” by OSHA.  One control is the erection of physical barriers, such as plastic sheeting to cordon off certain areas from the free flow of air typically in the hallways.

2) Many employers wonder if coronavirus cases are recordable on their 300 logs. Coronavirus, COVID-19, is not an exception to the OSHA Recordkeeping rule.  Therefore, if the coronavirus, COVID-19, diagnosis is confirmed, is work related, and results in treatment beyond first aid, lost time, modified duty, or other recordable circumstance, then it is recordable, and needs to be recorded as an illness on the OSHA 300 log.  If a work-related COVID-19 case for an employee results in in-patient hospitalization, then it is reportable within 24 hours of that in-patient hospitalization to the OSHA Area Office or the national OSHA line.

3) The EEOC has issued guidance that employers in this situation are allowed to take the temperatures of incoming employees.  Typically taking the temperature of an employee is considered a medical examination that must be justified by business necessity.  In the current pandemic situation, employers who test all employees coming to work each day have the business necessity of the pandemic to justify that examination.  Employers should take the temperature of all employees if that will be the employer’s practice, a control to protect other employees in the manufacturing plant or construction site.

4) Also, when using respiratory protection as PPE, the employer must either implement a respiratory protection program with mandatory fit testing, medical evaluation, training on usage and storage, and sufficient facilities for cleaning and storage.  Or, if the employer considers the program voluntary, the employer must provide each employee with Appendix D to inform the employees of the uses and limitations of certain types of masks.  OSHA has issued temporary guidance during the pandemic to relax the annual fit testing requirement, but the temporary guidance requires the employer to follow stringent measures, such as:

  • Perform initial fit tests for each HCP with the same model, style, and size respirator that the worker will be required to wear for protection against COVID-19 (initial fit testing is essential to determine if the respirator properly fits the worker and is capable of providing the expected level of protection), and give workers training on the suspension of annual fit testing to preserve respirators, and then explain the importance of the user seal check, then nevertheless to conduct a fit test if there are visual changes in the employee’s physical condition to affect the seal, and other training.
  • Click here to see the complete guidance before seeking to employ any such suspension, rigorously follow the criteria listed in the publication.

OSHA is out inspecting workplaces and issuing citations.  Be very careful about the use of respirators by your workforce without having the proper program, or, in a voluntary situation, providing the Appendix D.

© Steptoe & Johnson PLLC. All Rights Reserved.

More governmental agency guidance on COVID-19 on the National Law Review Coronavirus News page.

Many Companies With More Than 500 Employees Could Qualify For Stimulus Loans

As the nation scrambles to take advantage of the $2 trillion stimulus benefits in the CARES Act, numerous sources have stated that only businesses with 500 or fewer employees are eligible to apply for loans under the Act’s Paycheck Protection Program. In fact, businesses with far more than 500 could be entitled to participate in the program.

First, section 1102(a) of the Act applies to any business concern, nonprofit organization, veterans’ organization, or Tribal business having the greater of:

1) 500 employees or

2) the “size standard in number of employees established by the [Small Business] Administration for the industry” in which the business operates.

These “size standards” are contained in a list maintained by the Small Business Administration, organized by North American Industry Classification System (“NAICS”) code, which establishes the maximum number of employees that a particular entity operating in certain industries can have and still qualify under the Paycheck Protection Program. Depending on the applicable NAICS code, a business with significantly greater than 500 employees may still qualify. For example, petroleum refineries (with capacity of less than 200,000 barrels per calendar day) and turbine manufacturers with up to 1,500 employees could qualify, businesses in the crude petroleum extraction, natural gas extraction and coal mining industries could qualify if they have up to 1,250 employees, and entities in the electric power distribution and natural gas distribution industries may have up to 1,000 employees and still qualify. These are only a handful of examples of hundreds of industries contained on the size standards list. Given the Act’s “greater of” language referenced above, the 500 employee maximum will apply even if the SBA’s size standard table indicates a lower number for a particular industry.1 Bear in mind that the SBA generally considers both the actual business concern, as well as all of its affiliates, in determining whether an entity qualifies as small.

Second, businesses must count “employees” as that term is defined under Title I of the CARES Act, i.e., an individual retained on a full-time, part-time, or “other basis.”  While the SBA previously had not expressly defined the term “employee,” the CARES Act has adopted preexisting SBA guidance from the SBA’s HUBZone Program to provide an explicit definition. As a result, it is likely that the full SBA guidance will be used to calculate the number of employees under section 1102(a) of the CARES Act. Under that guidance, an “employee” is an individual who works a minimum of 40 hours per month, including any employees obtained through temporary employee agencies. Independent contractors may also be considered an “employee” where there is evidence of an employee-employer relationship, which is assessed under a multi-factor test. On the other hand, independent contractors who are not considered employees would not count toward the entity’s employee count for purposes of determining eligibility under the Paycheck Protection Program.

1 The SBA’s size standard list also provides standards for certain industries expressed in annual receipts. These are not relevant under the stimulus package. If an industry’s NAICS code reflects a dollar figure, but does not include a number of employees, the 500 employee limit will apply.

© 2020 Bracewell LLP

For more CARES Act analysis, see the Nationa Law Review Coronavirus News section.

COVID-19 Impact on Executive Compensation – Salary/Wage Reductions

Companies impacted by the COVID-19 pandemic, including the concomitant widespread shelter in place orders, may be considering pay cuts for some or all of their workforce, either in addition to or instead of furloughs and layoffs.  In implementing salary or wage reductions, companies should be mindful of federal, state and local wage and hour and labor laws, consent and notice requirements under contractual agreements with individual employees or groups of employees, tax implications on subsequent “make-whole” or “make-up” payments, impact on employee benefit plan participation, governance considerations, and disclosure requirements for public companies.

Prior to implementing salary or wage reductions, companies should:

  • IDENTIFY affected employees and applicable state or local law:
    • Who are the employees affected by potential salary or wage reductions? Are they exempt or non-exempt? Are they part-time or full-time? How many employees are affected at any single location? Will company executives be impacted?
    • Is the salary or wage reduction being undertaken in connection with a reduction in hours? If so, is the reduction proportionate?
    • What state or local law is applicable to the employee’s employment?
    • What are the state and local requirements for the notice, if any, that must be provided to employees prior to or following a wage reduction?
    • Would a reduction result in the employee’s wage falling below the threshold level for exempt classification (currently $684 per week under federal law)?
  • REVIEW the potential effects of a salary or wage reduction under applicable law, contract, agreements, offer letters, and employee benefit plans:
    • Is the employee a party to an employment agreement, offer letter, or other agreement or arrangement that sets base salary? If so, does it expressly provide that base salary cannot be reduced, such that it would need to be amended?
    • Is the employee covered by an agreement, offer letter, or plan with a “good reason” or similar definition that would trigger severance, equity award accelerated vesting, or other rights as a result of a salary reduction? Is there an exception for across-the-board salary reductions and, if so, whether a limit or such reduction applies?
    • Does the employee participate in employee benefit plans and programs (e.g., group health plans, retirement plans, 401(k) plans, severance benefits, and vacation programs) that may be impacted by a reduction in hours and/or salary or wage reduction? For example, salary reductions may reduce an employee’s severance entitlement, pension accrual or matching contribution.
    • Does the company’s employee handbook address salary or wages during a leave of absence or furlough?
  • ACT to execute waivers, deliver notices, take action with respect to employee benefit plans and, for publicly traded companies, provide disclosure of the salary reduction where necessary:
    • Obtain consents to salary or wage reductions and waivers of “good reason” from employees as needed.
    • Provide advance notice in accordance with applicable state and local requirements.
    • Take any necessary actions under employee benefit plans and programs to continue or end coverage/participation, as applicable.
    • Prepare and file disclosure if/as required for public companies (e.g., Form 8-K, press release).
    • Consider creating a working group including representatives from HR, legal, and investor relations to coordinate actions and communications to internal and external interested parties.

 

Wage and Hour considerations; Notice considerations

A number of states and some cities require companies to provide employees with notice of salary or wage reductions and/or notice of hours reductions within a certain number of days in advance of the reduction or within a certain period following the company’s decision to take such actions. Companies with operations in multiple states should confirm with labor/employment counsel whether state or local notice is required. If notice is required, the content of the notice should be reviewed by counsel to confirm that the messaging of the notice is consistent with the company’s approach for labor, employment, employee benefit plan, contract, and tax purposes.

In considering whether to reduce salary or wages of employees classified as “exempt” under the federal Fair Labor Standards Act, companies should carefully analyze applicable federal and state law (for example, exempt employees who perform any work during a work week are generally entitled to full salary, subject to limited exceptions).  Companies should also analyze whether such a reduction would be reasonably likely to result in the employee’s wage being reduced below the threshold level for exempt classification ($684 per week under federal law and $1,125 per week under New York law). If so, companies should consult labor/employment counsel with respect to the best approach with respect to such employees.  Additionally, while outside the scope of this blog post, companies that have employees represented by a union or subject to a collective bargaining agreement, should review any limitations or prohibitions under those agreements.

Contractual agreements

Compensatory arrangements entered into by companies with their employees, particularly with respect to their executive teams, and other arrangements maintained by companies (e.g., severance plans, equity plans, incentive compensation plans) often include provisions that require a specified salary to be paid and/or allow the employee to terminate his or her employment for “good reason” as a result of a salary reduction.

A common provision in good reason definitions is a reduction in the employee’s base salary and/or target bonus opportunity.  Once an employee’s good reason provision is triggered, and assuming that the wages are not reinstated within a short period of time or the employee does not consent to such reduction, the employee could terminate his or her employment and be entitled to severance, accelerated equity vesting, or other rights.  Certain agreements contain exceptions to these provisions for company-wide reductions or similar reductions across the senior-executive team, sometimes up to an overall cap.

In addition, employment agreements or offer letters may expressly provide that an employee’s base salary cannot be reduced below the stated level. If so, a reduction without the employee’s consent could result in a contractual claim. Further, amendments to or terminations of certain broad-based plans providing for specified levels of compensation may be limited or delayed by the provisions of the plan or certain advance notice requirements under the Employee Retirement Income Security Act of 1974.

Companies considering broad-based salary or wage reductions should review their employment agreements, offer letters, and any other agreements that require payment of a specified salary or that contain good reason protections, and should discuss with executive compensation and benefits counsel whether reducing wages could trigger unintentional contractual or administrative claims or severance obligations.

Tax considerations

Companies considering providing for salary, wage, or other compensation reductions in connection with the opportunity of a later guaranteed or conditional (i.e., merit or performance based) “make-whole” or “make-up” payment should be cautious, as such an arrangement could potentially result in an impermissible deferral of compensation under Internal Revenue Code Section 409A (“Section 409A”).  Generally speaking, Section 409A, which governs non-qualified deferred compensation arrangements, requires elections to defer compensation to be made no later than December 31 of the calendar year before the calendar year in which the employee performs the services to which the compensation relates (there are certain exceptions with respect to performance-based compensation that may be applicable to bonuses, but a discussion of these exceptions is beyond the scope of this blog post). If an employee’s consent is required for the compensation reduction and if in connection with such reduction, the company commits to paying additional compensation to the employee in a future taxable year, this type of arrangement could result in adverse tax consequences to the employee (including a 20% additional income tax in addition to applicable income tax). Companies should consult executive compensation and benefits counsel before implementing any program that includes a “make-whole” or “make-up” payment that could be paid in a calendar year following the calendar year of the compensation reduction.  Companies considering such programs should also consult executive compensation and benefits counsel to determine whether Congress, the Treasury Department, or the Internal Revenue Service have issued relief under Section 409A or other guidance in light of the COVID-19 pandemic and widespread salary/wage reductions.

Employee benefit plan considerations

Salary or wage reductions, especially when coupled with layoffs or furloughs, may impact employees’ participation in employee benefit plans. Companies should discuss the impact of a salary or wage reduction with their employee benefits counsel. In particular, companies should:

(1) Review their group health plan and Affordable Care Act requirements to assess requirements for continued coverage, either as an active employee or through COBRA, and the cost for that coverage;

(2) Monitor FSA and Dependent Care FSA contributions to be sure they are properly made depending on the facts; and

(3) Consider the effect of salary or wage reductions on 401(k) contributions and outstanding loans.

Governance considerations

In implementing salary or wage reductions, companies should confirm that such actions are approved at the appropriate level for corporate governance purposes. While decisions to reduce salary and wages for rank-and-file employees may in some cases be made by company management, salary and wage reductions for senior management and executive officers and director fee reductions should be approved by the Compensation Committee or the full Board, as applicable. Companies should consult executive compensation and benefits counsel to review governance documents (including Compensation Committee charter) and prepare the necessary approvals.

Public company disclosure considerations

For public companies, Form 8-K rules generally require disclosure of information that is important to security holders, including disclosure of information under Regulation FD and events material to corporate governance and management.  Broad-based or selective salary or wage reduction programs may trigger disclosure on a Form-8-K (whether under Item 2.05 as steps taken in connection with exit or disposal activities, Item 5.02 as a material amendment of a material management contract or Item 7.01 / Item 8.01 as Regulation FD disclosure or voluntary disclosure) and filing requirements should be carefully reviewed and considered by public companies with counsel. Contracts entered into in connection with salary or wage reductions may be required to be filed with the company’s next quarterly or annual report.

Our executive compensation lawyers are tracking the companies that have been implementing salary and wage reductions and are available to discuss the alternatives that other companies have been implementing.

© 2020 Proskauer Rose LLP.

For more on employment considerations amid the COVID-19 pandemic, please see the Coronavirus News section of the National Law Review.

COVID-19: Paycheck Protection Program: Is this the solution you have been waiting for?

The $2.2 trillion coronavirus stimulus bill enacted by Congress on March 27 provides immediate cash assistance to small businesses that keep their employees or recall employees they have furloughed or laid off due to financial hardships related to COVID-19.  The money is available through a Small Business Administration (SBA) loan program that allows businesses to keep the loan proceeds as a grant for eligible expenses, including payroll, for the period between February 15 and June 30, 2020.

This program, called the Paycheck Protection Program (PPP), is a powerful tool for businesses with fewer than 500 employees to get immediate assistance with meeting operating expenses, with the prospect of not having to repay some or all of the loan.  It’s also available for nonprofits.

Here are the highlights of the program:

Maximum Loan Amount

  • The PPP raises the maximum amount for an SBA loan by 2.5x the average total monthly payroll cost, or up to $10 million.  The interest rate may not exceed 4%.

Qualified Costs

  • Payroll costs

  • Continuation of health care benefits

  • Employee compensation (for those making less than $100,000)

  • Mortgage interest obligations

  • Rent on any lease in force prior to February 15, 2020

  • Utilities

  • Interest on debt incurred before the covered period

Businesses Eligible to Obtain These Loans

  • Businesses with fewer than 500 employees.

  • Small businesses as defined by the Small Business Administration (SBA) Size Standards at 13 C.F.R. 121.201.

  • 501(c)(3) nonprofits, 501(c)(19) veteran’s organization, and Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees.

  • Hotels, motels, restaurants, and franchises with fewer than 500 employees at each physical location without regard to affiliation under 13 C.F.R. 121.103.

  • Businesses that receive financial assistance from Small Business Investment Act Companies licensed under the Small Business Investment Act of 1958 without regard to affiliation under 13 C.F.R. 121.10.

  • Sole proprietors and independent contractors.

Loan Forgiveness

All or a portion of the loan may be forgivable, and debt service payments may be deferred for up to one year.  The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25% of their prior year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that rehire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.

Application Process

Current lenders through the Small Business Administration 7(a) are authorized to make determinations on borrower eligibility and creditworthiness without going through the SBA.  These lenders can be found here. For eligibility purposes, lenders will not be determining eligibility based on repayment ability, but rather whether the business was operational on February 15, 2020, and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.

Timeline

The SBA is required to issue implementing regulations within 15 days, and the U.S. Department of Treasury will be approving new lenders.

©2020 Pierce Atwood LLP. All rights reserved.

DOL Publishes Additional FAQs, Making Clear That Employees on Furlough or Layoff Are Not Eligible for FFCRA Paid Sick Leave or Expanded FMLA

The Department of Labor issued additional FAQs on Thursday March 26. They now offer 37 FAQs on how the paid sick leave and expanded FMLA leave under the Families First Coronavirus Response Act will apply. The leave obligations begin April 1, 2020.

As more and more employers are required to shutdown due to state orders or layoff employees due to business concerns, a frequently asked question is whether the employees impacted by these closures and layoffs will still be eligible for paid sick leave and paid FMLA leave under the FFCRA. According to the FAQs issued by the DOL, they will not:

24. If my employer closes my worksite on or after April 1, 2020 (the effective date of the FFCRA), but before I go out on leave, can I still get paid sick leave and/or expanded family and medical leave?

No. If your employer closes after the FFCRA’s effective date (even if you requested leave prior to the closure), you will not get paid sick leave or expanded family and medical leave but you may be eligible for unemployment insurance benefits. This is true whether your employer closes your worksite for lack of business or because it was required to close pursuant to a Federal, State or local directive. You should contact your State workforce agency or State unemployment insurance office for specific questions about your eligibility.

***

26. If my employer is open, but furloughs me on or after April 1, 2020 (the effective date of the FFCRA), can I receive paid sick leave or expanded family and medical leave?

No. If your employer furloughs you because it does not have enough work or business for you, you are not entitled to then take paid sick leave or expanded family and medical leave. However, you may be eligible for unemployment insurance benefits. You should contact your State workforce agency or State unemployment insurance office for specific questions about your eligibility. For additional information, please refer to https://www.careeronestop.org/LocalHelp/service-locator.aspx.

In addition to several FAQs on the impact of layoffs and furloughs, the FAQs also address what documentation employers should request, whether the paid sick leave and paid FMLA can be used intermittently and whether other employer-offered paid leave can be used concurrently with that required by FFCRA.

Jackson Lewis P.C. © 2020

What Employers Need to Know About HIPAA

As the COVID-19 pandemic continues to affect everyday business operations across the country, employers are confronting a variety of issues on how to handle these disruptions. The intent of this Legal Update is to educate employers about under what circumstances they are permitted to disclose information related to an employee’s or patient’s positive test for COVID-19 under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Americans with Disabilities Act (“ADA”).

It may be difficult in some circumstances to discern whether health information was received by an employer through its ordinary status as an employer or through its status as a self-insured health plan. Employers should take care in making this determination based on the facts and circumstances of each situation and seek legal counsel as needed.

Covered Entities under HIPAA

  • HIPAA defines “Covered Entities” to generally include health care providers, health plans, and health care clearinghouses.

  • Covered Entities may not disclose protected health information (“PHI”) unless permitted by HIPAA. An individual’s health status related to testing positive for COVID-19 is considered PHI.

  • One permitted disclosure under HIPAA is that Covered Entities may disclose PHI to public health authorities to the extent relevant to the authority and purview of public health authorities. This includes disclosing positive test results for COVID-19 to state and local health departments, HHS, or the CDC as appropriate.

  • Covered Entities may not disclose PHI to the media.

  • Unless an employer is otherwise a Covered Entity as described above, it is not subject to HIPAA’s restrictions on disclosures of PHI.

Confidentiality under the ADA

  • The ADA requires employers that obtain medical information through inquiry or examination to maintain it in a confidential medical file and keep it separate from the employee’s personnel file.

  • Employers have been encouraged by the CDC and EEOC to question their employees regarding travel, exposure, or symptoms related to COVID-19. Any medical information disclosed as part of this dialogue should be treated as confidential.

  • If a positive case is identified in the workplace, the employer is encouraged to investigate the exposure of others in the workplace without disclosing the name of the individual or any personally identifiable information about the person.

  • The confidentiality requirements under the ADA do not prohibit disclosure to state, local, or federal health departments.

Employers with a Self-Insured Health Plan

  • Notwithstanding the discussion above regarding employers, a self-insured employee health plan maintained by an employer is a Covered Entity under HIPAA (i.e. the plan itself, not the employer, although we acknowledge this distinction is difficult to make for most employers). As a result:

    • If the employer obtained the information through its status as a plan (i.e., as the payer for the employee’s health care services), then such information is PHI and subject to HIPAA (see first bullet above for Covered Entities).

    • If the employer receives the information in the ordinary course (e.g. voluntary disclosure by the affected employee), then the second bullet above regarding employer permitted disclosures is applicable.

©2020 von Briesen & Roper, s.c

The Coronavirus: Best Practices to Mitigate Risks in the Workplace

As impact of the Coronavirus Disease 2019 (COVID-19) continues to develop, employers and employees are increasingly concerned about the risk of contamination. Employers should consider practical steps to protect their employees, address employee concerns and maintain productivity during potential business disruptions that may result from the spread of this virus.

  • Education and communication are critical:  Employers should circulate the most recent Center for Disease Control and Prevention (“CDC”) guidance for employers, as well as state and local guidance, such as those provided by New Jersey and New York City. Review for updates from federal, state and local levels as there will be daily developments and updates. Provide significant updates to employees on a regular basis.   We recommend providing these materials via several methods, such as email, postings in breakrooms, on the company intranet, and hard copies inserted with weekly payroll. Ongoing regular communication with employees will create confidence that the business is taking their continued health seriously and help to avoid panic.

  • Encourage sick employees to stay home: When an employee calls in sick, particularly where the symptoms are associated with COVID-19, employers should err on the side of caution and encourage those employees to stay home. New York City and New Jersey both require employers to provide paid sick leave, which includes time off for employees to care for themselves, care for family members, for time off related to school closures and the like, which eligible employees may need to utilize. Employers should consult leave laws and policies that apply to the company. Moreover, employers should not require a healthcare provider’s note for employees who are sick with respiratory illnesses to validate their illness or to return to work. Relaxing such requirements is important given concerns about containing further spread of the virus and the potential inundation of healthcare providers who may have increasing limited resources.

  • Allow for telecommuting/teleconferencing: Employers should not place emphasis on in-person attendance, and should evaluate telecommuting options. This may require employers to temporarily relax current telecommuting policies, or to take steps to set up a method for telecommuting.

  • Review polices regarding travel and off-site events: Employers should review travel and off-site meeting needs and consider making in-person attendance voluntary.  If an employee voluntarily decides to attend off-site events, we recommend that employers require the employee to sign a short assumption of risk and waiver of liability.  If an employee declines to attend given concerns of the virus, employers should not treat such conduct as insubordination and should consider work around arrangements.  Teleconferencing may provide another means for employees to attend off-site functions.  The CDC guidance recommends travelers stay home for 14 days from the time the person leaves an area with widespread, ongoing community spread.  We recommend employers adopt similar policies as applied to employees returning from business or personal travel.

  • Encourage healthy practices:  Encourage employees to engage in healthy practices, such as regularly washing and/or disinfecting their hands. To the extent an employer is able to secure these items, they should  make disinfectants and hand sanitizers available to employees, especially upon entry to the work place.  Employers also should arrange for periodic industrial cleaning and notify employees of those efforts.

  • Identify areas of risk: Identify health risks specific to each work site, and a plan to address concerns.  Review CDC and the Occupational Safety and Health Administration’s guidance providing safety tips and highlighting potential areas of risk.

  • Avoid stereotyping: Employers should not make determinations of risk or treat employees differently based on race or country of origin.

  • Maintain confidentiality: If/when an employee is suspected or has been confirmed to have contracted the virus, employers should act to maintain confidentiality around the employee’s diagnosis. In addition, employers should refrain from asking employees questions about their symptoms and medical conditions or suspected conditions.

  • Train managers: Train managers on how to handle concerns and preventative steps that the company is taking to manage the potential spread of the virus.  Remind them of current policies and any changes that the business has decided to make to accommodate employees and business needs during this time. Encourage managers to promptly address all leave requests and meet with team members regarding concerns to engage in a dialogue to move forward in a way that benefits both the employee and the company. It may be prudent to appoint a single department or point of contact for COVID-19 questions or concerns that managers need to further discuss.

  • Consider other long term considerations such as:
    –  Consider creating a plan that involves how to prepare for a pandemic, including how to deal with office closures to avoid business disruption.  The CDC encourages employers to plan for a possible coronavirus outbreak and advises employers to ensure that their plan is flexible and well communicated to employees.  A formal plan may help the employer to focus on necessary steps to prepare and ensure a single message regarding preparedness is communicated to employees.

    –  Recognize that there may be legal rights associated with an employee who has the virus or who is perceived to have the virus under federal, state and local disability and leave laws.

    –  If employees are represented by a union, consider whether there are any issues that need to be addressed with the employees’ bargaining representative and whether there are any provisions in the company’s collective bargaining agreements that may be affected.

Importantly, employers should keep in mind that the U.S. is early in the process of understanding and combating COVID-19. The situation is rapidly evolving and employers will need to pay close attention to daily developments.  When in doubt, reliance on the guidance provided by health experts, government agencies, and counsel will best insulate employers from exposure to liability for discrimination, privacy or other legal claims from employees.

© Copyright 2020 Sills Cummis & Gross P.C.

For more on the COVID-19 pandemic, please see the National Law Review Coronavirus News page.

Options for Employers When Employees Cannot Work From Home

Despite many politicians and employers discussing the option for employees to work at home, there are millions of employees who simply cannot do that. Bartenders, restaurant servers, cashiers, and many others have no one to serve and nothing to ring up when they work at home.

Employers of such employees accordingly have a difficult decision to make when business is at an all-time low or they have been shut down. Most cannot afford to pay employees during this time period and hope employees will qualify for unemployment benefits. The question for these employers thus becomes–to fire, or not to fire.

This is where a work furlough comes into play. A work furlough is essentially a temporary layoff that qualifies for unemployment benefits.

Furloughs rose in popularity some years ago when businesses had to cut costs. Most employers knew employees who worked from paycheck to paycheck would suffer a financial hardship if the employees lost their jobs. Employers did not want to terminate employment. These employers wanted to minimize the negative impact, psychologically and monetarily, a termination brings, and the hard feelings an employee may carry following termination. Employers wanted employees who were already-trained to return to work at the end of a furlough, rather than having to start the hiring process from scratch.

Work furloughs generally have a set beginning and end date, similar to the 15-day shut-down ordered in many cities. The employer does not pay the employee during the furlough. Employees, however, generally qualify for unemployment compensation benefits.

Employers who want to maintain better relations should tell their employees to apply for unemployment benefits on the first day of the furlough. This ensures the employees will receive the maximum compensation possible. Even an employee who uses vacation time or personal time may qualify for unemployment benefits.

Usually there is a one week waiting period before an employee is eligible to receive any unemployment benefits. Many states have benevolently waived this one week waiting period for job losses suffered due to the pandemic. In these states, employees will receive benefits beginning “day 1.” The employee will receive compensation during the second week and any later weeks during which the employee is not working.

Any employee who files after the first week of the furlough must use the second furlough week as the waiting period. The employee, therefore, loses a week of unemployment compensation.

Even if the furlough period is only one week in length, employees should file for benefits. This helps the employee if the employer is forced to extend a furlough or put employees on furlough again later that same year. The one-week waiting period only applies to the first week when the employee did not work during the first furlough. The employee does not have to wait yet another week to receive benefits (compensation) during any furloughs that take place within 12 months of the first furlough.

While furloughs are an excellent option for employers to consider, any employer considering termination or a furlough must carefully consider all state and local laws; the state emergency declarations and laws issued, given the pandemic; and federal law, including any relief package or whether the number of employees furloughed triggers obligations under WARN.

© Polsinelli PC, Polsinelli LLP in California

For more on the COVID-19 outbreak, see the National Law Review dedicated Coronavirus News section.