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Wage and hour litigation issues loom for employers

Wage and hour litigation issues loom for employers

Employers are expected to face significant litigation over wage and hour issues because of the complex issues — and equally complex federal, state and local regulations — they must deal with — as they bring employees back to the workplace or firm up plans to have them remain working from home, experts say.

While the Fair Labor Standards Act essentially governs federal issues, state law is often even more stringent and presents a daunting challenge to multistate employers, these experts say.

The issues faced by employers are two-fold: those impacting workers returning to the workplace and those relevant to employees who plan to remain working from home.

Issues related to employees who return to the workplace amid the ongoing COVID-19 pandemic include paying for time spent having their temperatures taken, donning and doffing protective clothing and equipment, and wiping down their computers.

Issues regarding employees who work from home include paying them for the equipment they use and for after-hours work, including responding to emails, and submitting accurate time records.

Also significant in either case are the pay issues employers may confront because of employees previously exempt from being paid overtime who may lose that exemption and must now be paid for it, experts say.

While there has been relatively little litigation to date, experts expect a significant amount.

“Most of what I’ve seen so far has been very simple stuff, like a company that’s having financial problems doesn’t pay its workers,” said Patrick J. Bannon, a partner with Seyfarth Shaw LLP in Boston, who works with employers.

But, “the economy has changed really fast” and the wage and hour laws are being applied to what are essentially new workplaces “and there are so many different issues that are unsettled, I think it’s going to be a field day for plaintiff lawyers.”

With 40 million people having applied for unemployment benefits, “there’s going to be a lot of wage and hour lawsuits,” said Adam D. Kemper, a partner with Greenspoon Marder LLP in Boca Raton, Florida, who focuses on labor and employment law.

“A lot of companies get it wrong,” because their business’ disruption and the economic downturn lead to split-second decisions without considering the wage and hour implications, he said.

The cost of class actions can be quite expensive, said Gregory P. Abrams, a partner with Faegre Drinker Biddle & Reath LLP in Chicago who represents employers. The law allows liquidated damages, “which can be double the amount of unpaid wages,” as well as attorneys fees. 

This may turn out to be a long-term issue, experts warn.  Employees have two years under federal law to file wage and hour lawsuits, while under state law in New York they have up to six years; in California, four; and in Pennsylvania, three, said Jason E.  Reisman, a partner with Blank & Rome LLP in Philadelphia, who co-chairs the firm’s labor and employment practice group. 

One expected issue is the time employees spend waiting in line to have their temperature taken, or to put on or take off protective clothing and equipment.

Experts point to the U.S. Supreme Court’s unanimous 2014 ruling in Integrity Staffing Solutions v. Busk, which held that warehouse employees need not be paid for the time they spend going through security checks to ensure they have not stolen any products.

“Whether temperature checks need to be treated as working time is an issue that has not been definitively resolved yet in the courts or through agency guidance,” said Paul DeCamp, a member of Epstein Becker & Green P.C. in Washington, who is co-chair of the firm’s national wage and hour practice group. 

“Nevertheless, that type of consideration is something that businesses need to think about now, if they’re going to be engaging in any of that sort of activity,” which includes taking temperatures, asking employees questions at the start of a shift or checking for symptoms.

Under California law, time spent under employers’ control must be compensated, said Paul R. Lynd, counsel at Arent Fox LLP in San Francisco, who focuses on wage and hour issues.

“All kinds of factual scenarios could develop” over when workers’ time must start to be recorded, said Lisa A. Schreter, a shareholder and co-chair of the wage and hour practice with Littler Mendelson P.C. in Atlanta.

For instance, what if someone is waiting in the lobby of a high-rise office building to get on an elevator and they get a business call? Does that mean their workday has begun and they must be paid from that point? “There are all kinds of permutations” once you are taken out of the regimented workplace, Ms. Schreter said. 

“I recommend employers pay” for even minimum amounts of time spent on tasks such as having temperatures taken, said Ellen C. Kearns, a partner with Constangy, Brooks, Smith & Prophete LLP in Boston, who represents management on labor and employment issues.

“Picture yourself as an employer before a jury telling the jurors that you decided not to pay for washing their hands and taking their temperatures, because it was de minimus. I don’t think you would be well received even if that were true,” she said.

Paying workers accurately for their time, including after-hours work, is a critical issue, experts says. For employees working from home, “probably the most egregious example is when their boss sends them an email after hours,” Mr. Reisman said. “It makes it immediately hard for the company to argue they didn’t know the employee was working.”

Another critical issue is expense reimbursement. This may apply to everything from computers to office furniture to high-speed internet access and telephone expenses, Mr. DeCamp said.

“For some workers, they already have those items in place. For others, this may be completely new cost. The laws vary significantly from location to location regarding which of those costs employers need to bear.”

Experts cite California, Illinois and New York as particularly challenging to employers. In California, for instance, employers are obligated to at least partly reimburse employees who work from home for their internet access, even if the workers were paying a bill for their personal use anyway. 

“Obviously, plaintiff lawyers will push the envelope and argue for more business reimbursement,” Ms. Schreter said.

Regardless of whether they’re returning to the workplace or working from home, another issue is whether employees who were exempt from being paid overtime remain so as salaries are cut. 

Experts point out that employees paid less than $684 a week under federal law must be paid overtime.

Their status as nonexempt employees also may change if, as companies adjust their workforces through layoffs, they can no longer be said to be in a supervisory position.

Mitchell W. Quick, partner and practice group chairman, labor and employment relations, at Michael Best & Fredrich LLP in Milwaukee, said there will not be a problem if, for economic reasons, a worker’s salary is reduced for a period of time, but there “can’t be a flip-flopping from week to week.”

Observers say that while liability incurred over wage and hour issues is generally not insurable in employment practices liability insurance policies, depending on the policy employers may be reimbursed for legal expenses generated in defending wage and hour claims.

“You virtually never see the policy provide coverage for the wages themselves, but there’s oftentimes a provision in the policy that covers a portion of the defense costs,” Mr. DeCamp said.

More insurance and risk management news on the coronavirus crisis here.