Covid-19 Class Action Risks are Real: Is Your Company Prepared?

As winter rapidly approaches, the U.S. still has no vaccine ready for market (although at least two vaccines look very promising) and Covid-19 cases are again rising sharply in most states around the country.  Throughout the pandemic, employers of all sizes and industries have had to grapple with business closure orders, remote working, an economy in turmoil, and on top of that, have had to navigate federal, state, and local government directives about how to keep their businesses open and their employees safe.  In so many respects, saying that 2020 has been “unprecedented” does not seem to do justice to the chaos and complexity of working amid a pandemic that has to date cost over 250,000 American lives.

To make matters worse for employers, their inability to adjust quickly enough or to accurately navigate the various Covid-19 related restrictions is leading to lawsuits.  And not just “run-of-the-mill” lawsuits, employees and advocacy groups are filing class actions to try and force employers to bring their Covid-19 response efforts into compliance with applicable state and federal regulations.

How to Avoid Wage & Hour Pitfalls

Paying and classifying employees correctly under the federal Fair Labor Standards Act (FLSA) and applicable state wage payment laws can be complicated even under normal circumstances.  However, Covid-19 has caused many businesses to institute large scale layoffs, reduce employees’ hours, or allow some or all of its employees to work remotely.  These rather sudden changes in response to Covid-19 have caused some employers to incorrectly pay employees – particularly those in a remote work setting where “normal work hours” may largely be left up to the individual employee.  Employers are inadvertently failing to pay overtime, minimum wage, meet the salary-exempt threshold for salaried employees whose work hours have been reduced, or failing to provide remote workers the meal and rest breaks required by state laws. Employees are filing class and collective actions to recoup these lost wages.

If this were not enough, the Families First Coronavirus Response Act (FFCRA) contains a wage and hour provision that can easily snare employers. Notwithstanding its paid leave provisions, the FFCRA provides that employers who violate the law by failing to provide the appropriate paid leave is also a failure to pay minimum wages due to the affected employee(s), thereby creating an additional source of potential wage and hour liability.

Practical Tip: Perform a wage and hour audit for your current staff to make sure that all work hours are being captured and that employees (both exempt and non-exempt) are being paid correctly amid reduced schedules.  Set up a system to administer FFCRA leave and have a point person that is responsible for Covid-19 related leave, pay, and benefit issues within your organization.

Failing to Provide PPE or Follow Proper Sanitation Standards

Depending on the states and localities in which your company operates, you may have been forced to quickly implement safety or sanitation measures and provide employees with PPE (Personal Protective Equipment) in order to help curb the spread of Covid-19.  Employees around the country have already filed class actions against their employers for failing to provide adequate PPE, failing to sanitize shared workspaces, and for failing to install barriers and shields to maintain a safe working distance. These actions most commonly assert that employers have either intentionally or negligently violated federal and state mandates regarding employee safety. 

Normally, employee claims for injury or illness suffered at work are limited exclusively to states’ workers’ compensation systems.  However, allegations that an employer intentionally ignored or was negligent in failing to implement PPE or sanitation standards may expose employers to direct liability beyond the workers’ compensation system.

No doubt, many employers feel overwhelmed by the amount of safety standards being issued – so much so that it can be difficult to identifying which standards apply to your business.  Such is life in a pandemic for employers.  While the new safety measures may be confusing, that is no defense for failing to follow properly issued safety and sanitation standards.

Practical Tip: Identify any federal, state, or local governmental guidelines that apply to your business and then take steps to implement any sanitation or PPE requirements among your workforce.  Communicate the standards to your staff and then assign an individual or group at each affected location to monitor compliance with the regulations and to keep abreast of new or relaxed PPE and sanitation standards as the pandemic continues to evolve.

The Importance of Properly Notifying Employees of Layoffs

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with at least 100 employees to give employees sixty (60) days’ notice before closing a plant, on a temporary or permanent basis, or before conducting a “mass layoff” that will last for more than six months.  Many states have also enacted their own “mini-WARN” statutes, some of which mirror the federal law and others apply to a broader cross-section of employers.  The suddenness with which the pandemic arose and the swiftness with which many states and localities enacted “closure orders” or other operating restrictions took many employers by surprise.  They were forced to adjust their hours and layoff staff to account for both the downturn in their business and the social distancing requirements instituted by many state and local governments.  In their haste, many employers failed to give the appropriate layoff notices that the WARN Act or its state equivalents require.

For example, a class of 700 employees of a restaurant chain have sued because the restaurant allegedly failed to give them adequate notice of their layoffs. Similarly, a rental car franchise is defending a class action by employees whom the company initially furloughed, then terminated, allegedly without proper WARN Act notice.  These companies are defending the cases, in part, on the basis that Covid-19 layoffs were “unforeseen,” which is a viable defense under the WARN act.  However, even if the first wave of Covid-19 was unforeseeable, subsequent spikes in infection (and the resulting layoffs) likely are not.  Thus, understanding the WARN Act and applicable state “mini-WARN” notice obligations will be critical when evaluating potential layoffs that may be needed this winter.

Practical Tip:  Create a short (2-3 paragraph) written summary about the WARN act notice obligations and any state “mini-WARN” law that your company may be subject to.  Then put that summary (whether in electronic or hard copy) in a place where it will be seen and considered in the event of future layoffs.  Another good practice is creating a “layoff checklist” that identifies all the things you will need to do in order to implement a staff layoff; add the WARN Act to that checklist.

FFCRA Leave of Absence Issues Can Lead to Confusion

Earlier this year, Congress hurriedly passed the FFCRA (Families First Coronavirus Response Act), which expanded employees’ right to seek protected leave or reasonable accommodations for reasons related to Covid-19. Employers covered under the FFCRA (i.e., organizations with fewer than 500 employees) are required to make Emergency Family and Medical Leave and Emergency Paid Sick Leave available to employees. Employers have been rightly confused about such novel issues as which employees count toward the 500-employee threshold and specific circumstances that may or may not warrant leave.  Amid the confusion, employers are frequently misapplying the paid leave provisions, which is leading to consternation and litigation by employees.  Employers already face class action suits alleging that emergency FMLA or paid sick leave should have been granted under the FFCRA, but they were denied — or worse, were discharged in retaliation for seeking leave.

Practical Tip: Confusion is no substitute for compliance.  Each company’s HR department should identify whether their company is covered by the FFCRA and, if so, include with the company’s other leave request forms either a short checklist or simply a note reminding managers and HR staff to consider the FFCRA’s requirements when administering employee leave requests.

Moving Forward with Cautious Confidence

Regrettably, employers will be dealing with Covid-19 and its after-effects on their workforce for at least the next year.  Depending on the effectiveness of any vaccines or treatments, Congress or state legislatures may be compelled to enact further legislation to assist employers, individuals, or both as we continue to navigate the Covid-19 uncertainties together.  Employers should be hyper vigilant regarding compliance issues with respect to Covid-19.  And if your internal staff is not equipped to navigate the uncertainties, call an expert. 

The Experts at C2 Can Help

C2 Essentials has been helping its clients understand the various Covid-19 restrictions and requirements and allowing them the peace of mind to continue focusing on their core business so that they can emerge intact from this pandemic.  Do not be fooled by the “temporary” nature of Covid-19.  Yes, the restrictions and rule changes will end…but the class action lawsuits for non-compliance that are already underway will drag on for years.

C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.