Wage & Hour Pitfalls to Avoid During the COVID-19 Pandemic
As California employers continue to monitor COVID-19 developments and navigate workforce issues, they must remain mindful of the wage and hour issues that may arise. The following addresses some wage and hour issues that employers must not lose sight of during these tumultuous times:
Layoffs and Final Pay
Many employers are navigating layoffs and furloughs as businesses close their doors or cut services due to the pandemic. It is important to maintain compliance with California’s final pay laws during this time. Specifically, when employment is terminated, wages earned and unpaid at the time of discharge are due and payable immediately along with all accrued, but unused, vacation time. For purposes of final pay, "accrued vacation" includes traditional vacation pay as well as paid time off (PTO). In the event of a temporary closure, employers should clearly define a return-to-work date to avoid triggering the final pay requirements.
Furloughs and Exempt Employees
Furloughs are a company-initiated short-term, temporary, unpaid leave of absence. Reasonable advance notice of furloughs should be given to employees. However, under the current circumstances surrounding the COVID-19 pandemic, advance notice is not always possible. Under California law, employers should not place exempt employees on partial week furloughs because exempt employees must be paid their full salary for a workweek during which ANY work is performed. Accordingly, the better approach is to implement a salary reduction due to reduced workload resulting from reduced business demands. Remember, exempt employees do not punch a clock so tying pay to the time an exempt employee spends performing work runs contrary to the exemption classification. That said, employers may deduct from an exempt employee’s paid leave bank (i.e., PTO, vacation, sick leave) for partial day absences, but it is NEVER permissible to deduct from an exempt employee’s pay for a partial day absence. On the other hand, employers may place exempt employees on full weeklong furloughs. As long as the exempt employee DOES NOT perform ANY work during the week, the employer is not required to pay the exempt employee’s salary for that week. Neither salary reductions nor full week-long furloughs will result in the loss of exemption status as long as the reduced salary does not fall below the minimum salary threshold for exempt employees. California currently sets exempt salary thresholds at $4,506.67 per month for employers with at least 26 employees, and $4,160 per month for employers with fewer than 26 employees. Importantly, employers should avoid lengthy furloughs and provide a return to work date to avoid the risk of triggering final pay obligations in the event the furlough is later deemed a termination.
Reporting Time Pay
Under California law, reporting time pay is triggered when employees report for a scheduled shift and are immediately dismissed or put to work for less than half their usual or scheduled day’s work. The law requires that for each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half the employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage. Employers must be mindful of this requirement in the event they are struggling to stay open and schedule employees to work in the hopes that they will be kept busy during a shift but are cutting shifts short. Additionally, employers who notify employees of layoffs after employees report for a scheduled shift, must also comply with this requirement.
Non-exempt Employees Working Remotely
Employers allowing hourly employees to work from home or otherwise remotely during the COVID-19 crisis should take care in assigning schedules based on business needs and consider limiting work time to not more than eight (8) hours in a day and not more than 40 hours in the week, authorizing employees to exceed these amounts only if authorized in advance in writing. Employees must track all time worked and report such time daily. Clearly inform non-exempt employees that if they are performing ANY
work, including responding to calls or emails about work duties, that time must be recorded and reported. No off the clock work is permitted. Remote workers should be informed of the employer’s expectations in writing, including that employees are expected to take all applicable breaks and to record meal breaks. Employers may want to consider company-issued electronic devices for remote workers to use in performing work duties to avoid expense reimbursement issues.
Expense Reimbursement Issues
Under California law, employees are entitled to reimbursement for all necessary expenditures incurred during the performance of work duties. Thus, California employees must be reimbursed for business-related expenses, such as equipment, materials, training, business travel and uniforms. In the event employees (both exempt and non-exempt) are using their own electronic devices or other equipment in order to perform work duties remotely during the COVID-19 pandemic, they are entitled to reimbursement for the necessary and reasonable use of such devices or equipment for business-related reasons. Employers should provide a written policy to employees explaining that reasonable business expenses will be reimbursed and how employees should request reimbursement for any business-related expenses they incur.
Timely Payment Of Wages
It is important to remember during this time that all wages earned by any person are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays. Specifically, under Labor Code section 204 labor performed between the 1st and 15th days, shall be paid for between the 16th and the 26th day of the month during which the labor was performed, and labor performed between the 16th and the last day of the month shall be paid for between the 1st and 10th day of the following month.