With heightened concern about the possible spread of COVID-19, a number of issues arise that concern businesses of all kinds. In this article, we discuss some questions companies frequently ask.
Because physicians and epidemiologists are still investigating many clinical issues surrounding COVID-19, this is a rapidly evolving situation, and employers in the United States should regularly consult the latest guidance from the Centers for Disease Control and Prevention (CDC) and other reliable sources to ensure that they understand the current situation and to determine whether the measures they are taking to control the spread of COVID-19 in their facilities are up-to-date.
In the meantime, however, employers find themselves faced with the need to develop policies surrounding the illness. Responding to the current circumstances calls for a multi-disciplinary approach, with legal advice being only a part of the decision-making process. We encourage readers to incorporate medical and public health expertise in their processes while operating within legal constraints as well. For that reason, some of the information below incorporates guidance from the CDC and other reliable medical and public health sources to help employers balance legal considerations with their concern for their employee’s overall well-being and contributing to general public health.
There is a substantial amount of inaccurate information circulating about COVID-19, some of which is sensational and some of which is affirmatively wrong. Two good sources of accurate information about COVID-19 are the CDC website and local county department of health websites. You can also sign up to receive email updates from the CDC about COVID-19.
Local health departments have the most up-to-date information about the status of the local community, which is the most relevant situational information for most employers and employees. In most areas, county health departments decide whether or not schools or workplaces should be closed. The Society for Human Resource Management website is also a helpful resource for employers, providing both general resources and answers to frequently asked questions as well as detailed member only guides on how to handle communicable diseases in the workplace.
We have provided a collection of sources we consider reliable on our Coronavirus Insights & Resources microsite.
There is currently no specific OSHA standard that covers preventing COVID-19 exposure. Existing OSHA standards may apply, including those regarding personal protective equipment. While not mandatory, OSHA has provided control and prevention guidance and the CDC has issued interim guidance for businesses and employers. Employers should also consult their local health authorities for any mandatory health measures that have been implemented.
Current medical and public health guidance suggests hygiene and social distancing are key to preventing the spread of COVID-19 in the workplace. These sources suggest the same good hygiene measures that protect your employees against the flu and common colds will also help protect against COVID-19. Creating a culture of hygiene in the workplace is an important step employers can take to provide a sense of control to their employees, reduce the transmission not only of COVID-19 but also similar respiratory illnesses also in circulation, and decrease the likelihood of success of claims that might be asserted in the case of workplace transmission of COVID-19.
Many healthcare businesses already provide training about the importance of handwashing and other protocols that reduce the transmission of respiratory illnesses. These approaches can be adopted by businesses of all kinds. A remarkably simple and easy to execute training technique is to provide instructional signage – signs that remind people to wash their hands after they have used a communal space and reminders about the proper way to cough and sneeze. The CDC has a collection of printable resources that cover topics related to stopping the spread of germs. Another effective and inexpensive technique for disease prevention is to provide supplies that encourage desired behavior such as establishing hand sanitizing stations, placing boxes of tissues in communal spaces, and providing a box of tissues at every employee’s desk.
Another way to encourage hygiene is to place sanitation wipes in all communal areas and encourage people to wipe equipment down after using it. Areas where such an approach can be helpful include coffee machines, conference tables, copying and fax machines and other communal equipment that is used more frequently than regular housekeeping staff can make the rounds. While it is also a good idea to require janitorial staff to increase time spent on routine sanitation – paying particular attention to doorknobs and handles, light switches, and elevator buttons in community spaces – continual sanitation by all employees will multiply the attention that is devoted to sanitation.
While these sorts of efforts might seem small, they are actually an important defense against the spread of any sort of illness in the workplace.
It should also be noted that as the spread of COVID-19 has increased, employers are considering more extensive measures that involve allowing workers to work remotely, staggering work hours or providing other means of social distancing, or closing facilities entirely. While in most instances these sorts of measures are not mandatory unless dictated by the local public health authority or other governmental authority, there may be business or public health reasons for adopting such approaches rather than an approach based solely on hygiene.
Many employers offer a telemedicine program as part of their employee benefit plan. Others may want to consider subsidizing telemedicine during the COVID-19 outbreak. Employees may wish to take advantage of telemedicine so that they do not have to share a waiting room with others who might potentially transmit COVID-19. Telemedicine allows healthcare providers access to a patient while reducing physical contact with the patient. It is being used all over the world to treat COVID-19. Healthcare providers wearing protective equipment must still draw blood, give IVs, and administer medication, but other telemedicine providers are able to assess and treat patients remotely. Telemedicine also facilitates remote consultations allowing doctors who are first experiencing a patient presenting with COVID-19 to benefit from the experience of doctors who have treated many cases.
Telemedicine is regulated at the state level, and the general rules for telemedicine apply even in cases when a potential public health emergency exists. Healthcare providers who wish to start offering telemedicine should consult an attorney to make sure that they have complied with all applicable laws and regulations.
For more information on the expanded access to telehealth and telehealth coverage, see e-Alert: Telehealth: A Powerful Tool in Fighting COVID-19 Emergency-Driven Waivers and Payment Parity Requirements, which addresses the expansion of telehealth coverage for Medicare beneficiaries, relaxed state-licensing requirements for providers, and more.
The FFCRA permits an employer to exclude an employee who is a “health care provider” from the requirements to provide additional FMLA leave and sick time. In other words, while the employer covered by FFCRA must generally grant extended FMLA leave and sick time to its employees, it can refuse to grant the extra time and sick pay to employees who are health care providers and emergency responders.
The FFCRA does not define “health care provider,” but instead references and adopts the definition in FMLA. The FMLA statute defines a “health care provider” to be a licensed doctor of medicine or osteopathy (an MD or a DO), but notes that the Secretary of Labor may issue regulations to include other providers in the definition. In the federal regulations implementing FMLA, the Secretary expanded the definition “health care provider” to include the following:
- licensed and practicing podiatrists, dentists, clinical psychologists, optometrists, and chiropractors (but only with respect to treatment consisting of manual manipulation of the spine to correct a subluxation as demonstrated by X-ray to exist);
- Nurse practitioners, nurse-midwives, clinical social workers and physician assistants;
- Listed Christian Science Practitioners in Boston, Massachusetts;
- Any health care provider from whom an employer or the employer’s group health plan’s benefits manager will accept certification of the existence of a serious health condition to substantiate a claim for benefits; and
- A licensed health care provider in a foreign country practicing in accordance with the law of that country.
Thus, one may conclude that “health care provider” includes not only MDs and DOs, but also podiatrists, dentists, psychologists, optometrists, certain chiropractors, physician extenders such as nurse practitioners and physician assistants, and the others listed. The definition does not include regular nurses, medical technologists, physical therapists, or other employees working for an employer in the health care field, such as front office workers. The definition also only includes individuals, not entities, and is focused on the employee, not the employer.
It is important to note that under the original FMLA, the reason a “health care provider” is defined is because employers may, in certain instances, require that employees seeking FMLA accommodation prove that they really are medically affected. The original FMLA regulations were drafted to define the type of “health care provider” a reasonable employer should be able to rely upon to opine regarding the employee’s medical condition.
However, FFCRA uses “health care provider” in an entirely different context – the type of employee to whom an employer may deny extra FMLA leave or paid time off. In that context (what types of employees may be too important to give extra time off), the FMLA context (what types of outside experts should certify an employee’s medical condition) may be inapplicable.
Thus, in the interim, it is clearly safe to conclude that employees who are licensed MDs and DOs may be excluded from the employees who get additional FMLA leave and paid sick time. It may also be reasonable to conclude that employees who are podiatrists, optometrists, dentists, nurse practitioners and the like may also be excluded from the additional benefits, but regular nurses, clerical and administrative staff, and techs are entitled to the additional benefits. However, given the misfit of the definition, it may be best to wait and see if the FFCRA regulations provide a different expansion of the definition that that given under the FMLA regulations.
Finally, while the definition of a “health care provider” is subject to debate based on the currently-provided definition, note that FFCRA does not even define “emergency responder.”
Labor & Employment
Many factors go into planning the communications elements of a crisis response communications plan. Legal concerns are only one element that should be considered in planning a communications strategy. Employers may wish to create a small task force that includes employees from diverse functions, including the legal function, to plan an internal communications strategy. This task force should issue regular, prompt, and clear communications about company policies, such as remote work policies, travel policies, leave policies, and infectious disease policies, and the context and reasons behind those policies. It may be important to communicate whether a policy is driven by legal requirements, concern about transmission of illness, and/or business-related concerns.
Many businesses appoint a spokesperson for their regular communications and define the cadence of regular communications. Businesses should also consider communicating to their employees how they will provide urgent updates, whether that is through push alert systems, emails, phone trees or a combination of those sorts of systems. Businesses should also consider creating an information hub to archive communications and post urgent alerts, which can also include reliable external resources that employees may find helpful.
All Health Insurance Portability and Accountability Act (HIPAA) rules and regulations apply, even in a public health emergency. Benefit plan administrators should be particularly careful. For those subject to HIPAA, an important provision to consider is 45 CFR 164.512(b), which deals with public health activities. In essence, it provides if a public health authority requests information and the public health authority has the statutory authority to request that information, it is permissible to disclose the legally required information to the public health authority, but the information must otherwise remain confidential and should not be disclosed to reporters, members of the county medical society, or others who might seek information from benefit plan administrators. It is always advisable to require those requesting the information to explain why such request is covered by a HIPAA exception to ensure the disclosure is appropriate.
HR administrators may have more leeway than those governed by HIPAA, but to avoid potential liability for invasion of privacy torts or violations of the Americans with Disabilities Act, the Family and Medical Leave Act, and state and local paid sick leave laws, they should consult counsel before disclosing any health information, particularly if the information can be tied to individual employees. The employer must balance the ability of other employees to protect their health with the privacy rights of infected individuals. In general, employers can disclose that an employee has been diagnosed but should avoid identifying the ill employee and should be careful before providing more specific information, particularly in small offices.
Where applicable, employers should also consider the applicability of data privacy laws, such as state laws like the California Consumer Privacy Act (CCPA), and international ones like the General Data Protection Regulation (GDPR). Any decisions about applicability of privacy laws or their exceptions should be made in consultation with counsel.
Employers may legally require an employee who is sick at work to leave the worksite and may also implement other attendance policies intended to protect the health of their workforce.
It is important for companies to have an infectious disease control policy and to consider how the policy applies to COVID-19. Companies should appoint a human resources administrator or another appropriate person to take calls from employees who believe they should self-quarantine and determine whether the self-quarantine policy applies in that employee’s situation. Consistency in applying the policy is critical.
In making determinations about the application of self-quarantine policies, it is important to note that COVID-19 can be hard to distinguish from other respiratory illnesses, particularly in mild cases. The CDC reports patients with COVID-19 have had mild to severe respiratory illness. Symptoms can include fever, cough, and shortness of breath. Symptoms may appear 2-14 days after exposure to the virus that causes the illness.
Keep in mind this is an evolving situation, and as the CDC comes up with new information, policies and their application may need to change. If a policy is changed, the change and the reason for the change should be clearly and widely communicated.
Employees who are ill with COVID-19 should follow the advice of their physicians. The CDC has provided guidance for assessing and managing risk of potential exposures to COVID-19. Employers should follow that guidance.
The CDC has also issued guidance that employers can use to determine whether employees who have traveled for business or personal purposes should be quarantined.
Requiring testing or health certificates for return to work for asymptomatic individuals is not a legal requirement and is generally not currently recommended so as to prevent further burdening the healthcare system.
Current CDC and Occupational Safety and Health Administration (OSHA) guidelines do not require closing facilities an ill person may have frequented, including places of employment. Employers should also follow their guidance of local public health officials. Other non-legal factors including the overall well-being of employees, customers, and the public at large may additionally guide the employer’s response and may be more important considerations. Some employers have voluntarily chosen to close their offices for a period of time, and perhaps to engage in additional cleaning, after an employee is diagnosed. Other options including allowing employees who are able to work remotely to do so, cancelling or conducting by teleconference in-person meetings, and staggering work hours to allow for social distancing.
Generally, the Americans with Disabilities Act (ADA), protects applicants and employees from disability discrimination. The ADA also regulates disability related inquiries and medical examinations for applicants and employees. In 2009, the U.S. Equal Employment Opportunity Commission (EEOC) issued a guidance document that addresses steps an employer should take to avoid violating disability laws in the face of a pandemic.
Additionally, airlines must comply with the Air Carrier Access Act (ACAA), which prohibits discrimination on the basis of disability in air travel.
Disability-related inquiries or medical examinations are allowed under the ADA if they are job-related and consistent with business necessity. It is important to note that medical examinations are not limited only to visits with a healthcare professional, but also include any procedure or test that seeks information about an employee’s physical or mental impairment or health – so, a medical examination could be something as simple as a measurement of an employee’s body temperature.
To meet the job-related and business necessity standard, an employer must have a reasonable belief based on objective facts that the employee’s ability to perform the essential functions of the employee’s job will be impaired, or that the employee poses a direct threat due to a medical condition. A direct threat is defined as “a significant risk of substantial harm to the health or safety of that employee or others, which cannot be eliminated or reduced by a reasonable accommodation.”
In its March 19, 2020 update to its Pandemic Preparedness in the Workplace and the Americans with Disabilities Act guidance document, the EEOC stated, “Based on guidance of the CDC and public health authorities as of March 2020, the COVID-19 pandemic meets the direct threat standard.” The EEOC noted, however, that when the CDC and state and local health authorities revise their assessment of the spread and severity of COVID-9, “that could affect whether a direct threat still exists.”
The EEOC also clarified that based on the situation in March 2020, which includes acknowledgement by the CDC and state and local authorities of the community spread of COVID-19 and issuance of related directive prescribing precautions, employers may measure employees’ body temperature. Employers should remain mindful, however, that fever screening is still a medical examination, and the fact that an employee has a fever or other symptoms remains subject to ADA confidentiality requirements.
The Families First Coronavirus Response Act provides for emergency paid sick leave and paid family leave to some employees. Paid family leave commences after the first ten days that an employee takes leave to care for a minor child whose school or place of care is closed due to COVID-19. After the first ten days, the employee receives two-thirds of the employee’s regular pay for the remaining period of the family leave. Employees may also be entitled to take up to 80 hours of paid sick leave due to other contingencies relating to COVID-19, including being ill with COVID-19 or caring for someone who is. Businesses with 500 or more workers are exempt from these requirements, and small businesses with less than 50 employees may seek waivers from the requirements under certain circumstances. The Act goes into effect April 2.
More generally, leave issues commonly involve a number of employment laws, including the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and local paid sick leave laws. COVID-19, because of its fatality rate, may be considered a serious health condition that is covered under the FMLA. And in Dallas, employees with the virus, or those caring for family members with it, may be eligible for paid sick leave under the city’s ordinance.
Employers may also be required to provide leave under the ADA to workers whose disabilities may put them at high risk for complications from the new virus. In such cases, employees may request leave or make a request to work from home as a reasonable accommodation. Employers should already have a policy in place for evaluating ADA-related requests. In making leave decisions, employers should consider looking beyond the strict legal requirements and take a more business-centered approach. Overly restrictive policies and practices may result in employees prematurely returning to work and potentially infecting others.
Generally, for there to be a compensable workers’ compensation claim, there must be an injury or occupational disease that occurs in the course of an employee’s employment, and that also arises out of that employment. In terms of the current COVID-19 outbreak, an employee may be entitled to workers’ compensation benefits if the employee was exposed to the virus while traveling on business or the employee was exposed to the virus by someone in the workplace. If an employee reports a belief that he or she contracted COVID-19 at work, employers should follow their standard accident and injury reporting procedures and, if they are subscribers, contact their workers’ compensation insurance carrier. Employers should avoid making their own determination as to where or how an employee contracted the virus, but allow their insurance carrier to conduct an investigation and make that determination.
There is no specific OSHA standard covering COVID-19. However, OSHA recordkeeping requirements mandate that covered employers must record certain work-related injuries and illnesses on their OSHA 300 logs. Ordinarily, a common cold or seasonal flu would not be considered a recordable illness, but a COVID-19 illness could be a recordable illness if the employee is infected as a result of performing work-related duties. A covered employer would be required to report a work-related COVID-19 illness only if ALL of the following criteria are met: (1) the illness has been “confirmed” as COVID-19 by the CDC or CDC-approved laboratory; (2) the work environment caused or contributed to the illness or aggravated a pre-existing illness or injury; and (3) the COVID-19 illness involves one or more of the general OSHA recording criteria set forth in 29 CFR 1904.7 (egs., medical treatment beyond first aid was necessary, employee lost one or more days from work, restricted work duty was necessary, etc.). If an employee suffers a COVID-19 illness solely from an exposure outside of the work environment, it would NOT be work-related and, thus, would not be OSHA-recordable.
OSHA requires employers to report any work-related COVID-19 illness or injury that (1) results in a fatality or (2) results in the in-patient admission of one or more employees into a hospital or clinic for treatment. However, a COVID-19 fatality would not be required to be reported if death from the illness or injury occurs more than 30 days after the work-related COVID-19 exposure. Likewise, if the employee’s in-patient admission to the hospital or clinic for treatment of COVID-19 occurs more than 24 hours after the work-related COVID-19 exposure allegedly took place, the illness would not be required to be reported.
Additional helpful information can be found within OSHA’s “Guidance on Preparing Workplaces for COVID-19” at www.osha.gov.
Employers should be mindful that OSHA protects an employee’s right to refuse to work if the employee reasonably believes that he or she is exposed to an imminent danger, which is defined as a reasonable expectation of death or serious physical harm immediately or before the incident can be investigated through OSHA’s enforcement procedures. OSHA has prepared guidance on how to prevent or limit workplace exposure to COVID-19. Employers should promptly address employee concerns regarding exposure to the COVID-19 and consult with legal counsel before taking any disciplinary action against employees who refuse to work.
The general risk of contracting COVID-19 likely will not constitute imminent danger. However, in cases where one or more employees at a work site have contracted the virus, there may be a chance that the imminent danger test has been met. Additionally, if two or more employees refuse to work due to fears about exposure to COVID-19 or one employee advocates for a group of employees who refused to work due to exposure to COVID-19, these actions may be protected under the National Labor Relations Act as protected concerted activity, even if the workforce is not unionized.
Creating a quarantine zone within the workplace could be problematic. It is unlikely that an employer could eliminate all contact between potentially exposed individuals and healthy workers. Spaces where exposed and non-exposed employees might interact include restrooms and communal areas, parking garages, and elevators. It is unlikely that all such facilities can be adequately segregated.
As an alternative, employers should consider the ability of the worker to perform his or her work remotely from home, including temporarily modifying the employee’s responsibilities to allow the employee to perform at least a portion of the employee’s responsibilities remotely from home. If it is not possible for employees who should be quarantined to work remotely, it is preferable that they be placed on leave rather than risking the infection of other workers. If employees are permitted to work remotely from home, employers should consult with legal counsel to determine whether any local paid sick leave laws or ordinances are triggered by the remote work.
In general, businesses that are not considered places of public accommodation can restrict access to their facilities by those who are not affiliated with the business. Healthcare providers should be mindful of any obligations under the Emergency Medical Treatment and Active Labor Act. Businesses, including particularly healthcare providers, who have a legitimate reason to know about exposure history should generally be able to ask visitors about their health and travel history. However, such businesses should develop their policy in consultation with counsel and should ensure the policy is applied equitably. In many instances, these policies are intended not to restrict access to the facility, but rather to determine the level of precaution that should be taken in interacting with the visitor. Businesses that institute such policies should also develop procedures that ensure the confidentiality of any information collected regarding health and travel history. Such procedures should include clear guidelines for how the information will be used, secured, retained, and shared.
Generally speaking, if you close a business and employees are not performing any work, you do not have to pay them. That said, if exempt employees perform any work during a work week, they must be paid their full salary for that work week. Depending on the nature of the business closure, employees’ paid time off or vacation pay may be applicable, and some state and local paid sick leave laws may require payment when a business is closed by a public official for a health-related reason. Employers should also ensure that any agreements with employees that might provide for some contractual payment in the event of a termination/layoff are followed. Employees may be able to seek unemployment compensation due to reduced hours or layoff from the closure.
After the promulgation of shelter-in-place orders by state and local governments that require many businesses to close for weeks, some businesses may be forced to lay off workers in order to manage cash flow and survive.
If a laid-off employee has accumulated paid time off, and that paid time off is available to the employee under the employer’s plan, then the employee is still considered to be receiving pay for the time period to which the paid time off applies, and the employee would not be eligible for unemployment compensation during that period.
After a lay-off, and if no paid time off is available, laid-off employees may be eligible to apply for unemployment compensation payments. Also, if an employer keeps the business open, but reduces working hours, affected employees may be eligible for partial unemployment.
Generally, workers are eligible for unemployment compensation if they have worked a sufficient period, become unemployed (or have hours reduced) through no fault of their own, are able and available for work, and actively search for work. Many states, including Texas, have also imposed a seven-day waiting period after a lay-off before unemployment compensation payments are available. However, the Texas Workforce Commission has stated that it will be waiving work search requirements for all claimants and the waiting week for those claimants affected by COVID-19. Other states have done the same.
As to the recent shelter-in-place orders, if a business closes because of a closure order from a governmental entity and faces unemployment compensation claims, Texas employers can argue that the Texas Labor Code allows the employer to ask for chargeback protection against the employer’s Texas Workforce Commission unemployment compensation account. Because unemployment compensation systems are run by each state, different rules may apply in other states.
In Texas, the Texas Workforce Commission maintains a program for mass claims for unemployment benefits. Under this program, an employer can submit documentation and information relevant to future claims to the TWC five business days before the layoffs. The TWC will then provide an employee information sheet that a business can give to its workers before the layoff, and start the claims process. Doing so helps prevent businesses being inundated with written notices of applications from each individual who applies for unemployment benefits.
The rapidly-developing COVID-19 crisis is leading many states to change various aspects of their unemployment compensation systems. For example, some states require employers to submits unemployment compensation claim information themselves. Texas does not currently have such a requirement. You can keep up with TWC by regularly checking the TWC website. You can also sign up for automatic updates from the TWC at https://twc.texas.gov/news/covid-19-resources-employers.
Generally speaking, there is not a sharp legal distinction between a furlough and a lay-off, except perhaps in certain situations involving governmental employment or employment covered by a collective bargaining agreement. For typical private-sector employment, a company may say that it is “furloughing” employees to communicate that the employer is temporarily laying off employees, with the general expectation that the employees can be recalled to work at a later time. The employees are not paid, and no work is done. Depending on the terms of the employer’s benefit plans, some employment benefits may be continued. Companies say they are “laying off” employees when an employer lets go of employees because the employer can no longer afford to pay them, their business is down, or other economic reasons, and there is no expectation or requirement that the employee be re-hired.
Possibly. If a company is covered by the WARN Act, it may have notice obligations if the company implements a “plant closing” or “mass layoff” in certain situations, even when the company is forced to do so for economic or other business reasons. Whether an event constitutes a plant closing or mass layoff under the WARN Act is dependent on whether the event meets the definition of a plant closing or mass layoff under the Act. Not every plant closing or mass layoff is covered.
Generally speaking, if a WARN notice is required, employers must provide at least 60 calendar days of notice prior to any covered plant closing or mass layoff. Note, however, that if employees are laid off for less than six months, then they do not suffer an employment loss and, depending on the particular circumstances, notice may not be required. Unfortunately, in situations like the one created by the Coronavirus, it is hard to know how long the layoff will occur, so providing notice is usually the best practice.
Fortunately, even in cases where the notice requirements would otherwise apply, the WARN Act provides a specific exception when layoffs occur due to unforeseeable business circumstances. This provision may apply to the Coronavirus. Employers should keep in mind that this exception is limited in that an employer relying upon it must still provide “as much notice as is practicable, and at that time shall give a brief statement of the basis for reducing the notification period.” In other words, once you are in a position to evaluate the immediate impact of the outbreak upon your workforce, you must then provide specific notice to “affected employees.” You must also provide a statement explaining the failure to provide more extensive notice, which in this case would obviously be tied to the unforeseeable nature of the outbreak and its aftermath. Employers should also keep in mind that some states have “mini-WARN” laws that may apply.
The Department of Labor’s guidance regarding the Families First Coronavirus Response Act (FFCRA) makes clear that companies should utilize the integrated employer test from the Family and Medical Leave Act as well as the joint employer test under the Fair Labor Standards Act to determine whether an employer meets the FFCRA’s 500-employee threshold.
The Department of Labor’s guidance regarding the Families First Coronavirus Response Act (FFCRA) makes clear that companies should utilize the integrated employer test from the Family and Medical Leave Act as well as the joint employer test under the Fair Labor Standards Act to determine whether an employer meets the FFCRA’s 500-employee threshold.
The definition of covered employer under the Emergency Paid Sick Leave Act does not take into account the “20 weeks or more in the current or preceding calendar year” language that is part of the definition of covered employer under the Family and Medical Leave Act. Based on guidance from the DOL, employers should look to the number of employees they have at the time an employee’s leave under the Families First Coronavirus Response Act is to be taken to determine whether they are a covered employer.
Under the Emergency Paid Sick Leave Act, an employee is entitled to paid sick leave if the employee is unable to work or telework because:
- the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
- the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- the employee is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or the employee is caring for an individual that has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- the employee is caring for his or her son or daughter if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable due to COVID-19 precautions; or
- the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
If an employee is unable to work or telework for any other reason that is not specified in the Act, then they are not eligible for paid sick leave under the Act.
The Emergency Paid Sick Leave Act takes effect on April 1, 2020, and eligible employees are entitled to paid sick leave under the Act beginning on the effective date.
An employee is entitled to paid sick leave under the Emergency Paid Sick Leave Act if the employee is unable to work or telework because the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19. If a federal, state, or local government issues a shelter-in-place order that prevents an employee from working, he or she may be entitled to leave under the Act.
Employees are only entitled to leave under the Emergency Paid Sick Leave Act if they are unable to work or telework due to a qualifying event, which includes leave for an employee experiencing symptoms of COVID-19 and seeking a medical diagnosis. It is possible that an employee may be entitled to paid sick leave under the Act for only a portion of a leave period.
The Emergency Paid Sick Leave Act does not prohibit intermittent use of leave under the Act.
The Emergency Paid Sick Leave Act specifically states that an employer may not require an employee to use other paid leave provided by the employer before using the paid sick time provided under the Act. Further, the Act asserts that nothing in the Act in any way diminishes the rights or benefits an employee is entitled to under any federal, state or local law, collective bargaining agreement or an existing employer policy. As such, the 80 hours of paid sick leave must be offered to employees in addition to, and prior to, any other paid time off already offered by the employer.
Some employers have made the decision to furlough their employees during this time due to business necessity. A furlough is generally an unpaid leave of absence. Because employees who have been furloughed are placed on leave for a reason outside of the six (6) reasons listed in Section 5102 of the Emergency Paid Sick Leave Act, we do not believe that furloughed employees are eligible to receive paid sick time under the Families First Coronavirus Response Act during the unpaid leave of absence. However, some state or local paid sick leave laws may cover employees who are on leave due to a workplace closure.
Should your company decide to furlough employees, we recommend that you consult with legal counsel to ensure you are in compliance with the Families First Coronavirus Response Act as well as any state or local paid sick leave laws.
An employee is only eligible to take leave under the Emergency Paid Sick Leave Act if they are unable to work or telework because of a qualifying event. If the employee is unable to work or telework because of advice from a health care provider to self-quarantine due to concerns related to COVID-19, he or she may be entitled to paid sick leave under the Act. In the event that an employee is unable to work or telework due to a medical concern that does not constitute a qualifying event under the Act, that employee may be eligible for leave under other laws, such as the Americans with Disabilities Act or state or local paid sick leave laws.
It is unclear as to whether an employer may require written notification from a health care provider in order to grant leave under the Act. However, employers are permitted to require employees to follow reasonable notice procedures in order to continue receiving paid sick leave under the Act, after the first workday an employee takes leave under the Act.
Under the Emergency Paid Sick Leave Act, public agencies or entities that are not private entities must comply if they employ one (1) or more employees.
We have had several questions about how you count the number of employees for purposes of the 500 employee maximum. In the DOL’s Families First Coronavirus Response Act guidance, the DOL directs employers to use two tests in determining the number of employees a business entity has. First, companies should use the “integrated employer” test from the Family and Medical Leave Act.
A corporation is considered a single employer under the FMLA rather than its separate establishments or divisions; thus, all employees of the corporation, at all locations, are counted for coverage purposes.
Separate businesses may be part of a single employer for FMLA purposes if they are an “integrated employer.” The FMLA essentially provides a test for determining if separate businesses are an integrated employer. Factors that are considered as part of the test include:
- Common management;
- Interrelation between operations;
- Centralized control of labor; and
- Degree of common ownership or financial control.
Keep in mind that a determination of whether or not separate entities are an integrated employer is not made based on any single factor but instead on the entire relationship reviewed in its totality. Many courts and administrative agencies consider the third factor to be the most important. The fourth factor is somewhat discounted because common ownership and financial control is an ordinary aspect of the parent–subsidiary relationship. If separate entities are found to be an integrated employer, then the employees of all entities making up the integrated employer must be counted.
Joint employment relationships may also have an impact on the number of employees an employer is considered to have. The Emergency Paid Sick Leave Act and the DOL’s guidance directs us to the Fair Labor Standards Act to determine whether there is a joint employer relationship that might impact the number of employees an entity has.
Conveniently, the DOL just released its Final Rule on Joint Employer Status Under the FLSA in January. Under that Rule, where an employee performs work for the employer that simultaneously benefits another individual or entity, there is a four-factor balancing test to determine whether the potential joint employer is directly or indirectly controlling the employee. The factors to be considered in assessing direct or indirect control include whether the potential joint employer:
- hires or fires the employees;
- supervises and controls the employees’ work schedule or conditions of employment to a substantial degree;
- determines the employees’ rate and method of payment; and
- maintains the employees’ employment records.
Similar to the integrated employer test, the analysis of whether an entity is a joint employer will depend on all the facts in the particular case, and the appropriate weight to give to each factor will vary depending on the circumstances.
It is important to note that the Families First Coronavirus Response Act is unique in that employers may be motivated to aggregate employees from separate but related entities in order to have 500 or more employees and, therefore, be exempt from the requirements of the Act.
In making decisions relating to aggregation, employers should be mindful of the following:
- Damages for violating the Families First Coronavirus Response Act are substantial. Employers aggregating employees and finding the Act does not apply should be certain that they are comfortable with their calculation and can support the determination that the Act does not apply.
- Employee head counts will certainly change during this time. Employers should reevaluate whether the Act applies if adjustments to their head count occur.
- Making a decision to aggregate employees now may negatively impact the employer during litigation in the future when aggregation could be problematic.
Additionally, only employees who physically work in the United States should be counted for purposes of the Act’s threshold.
The definition of covered employer and employee under the Emergency Paid Sick Leave Act does not take into account a look back period or any type of averaging. Employers should look to the number of employees they have on the effective date of the Families First Coronavirus Response Act to determine initial coverage by the Act. Employers will need to reevaluate whether the Act applies if they adjust their head count after the effective date of the Act. Remember that even if employers have fewer than 50 employees, the Emergency Paid Sick Leave Act will still apply unless the company qualifies for a small business exemption.
Yes. The Emergency Paid Sick Leave Act specifically states that an employer may not require an employee to use other paid leave provided by the employer before using the paid sick time provided under the Act. Further, the Act asserts that nothing in the Act in any way diminishes the rights or benefits an employee is entitled to under any federal, state, or local law, collective bargaining agreement, or an existing employer policy. As such, the 80 hours of paid sick leave must be offered to employees in addition to, and prior to, any other paid time off already offered by the employer.
Based on the DOL’s guidance for the FFCRA, the regular rate of pay used to calculate an employee’s paid leave is the average of the employee’s regular rate over a period of up to six (6) months prior to the date on which the employee takes leave. If an employee has not worked for his or her current employer for six (6) months, then the regular rate used to calculate an employee’s paid leave is the average of the employee’s regular rate of pay for each week the employee has worked for his or her current employer. Commissions should be included in calculating an employee’s regular rate of pay. However, any pay under the Emergency Paid Sick Leave Act or the Family and Medical Leave Expansion Act does not need to include a premium for overtime hours.
Under the Emergency Paid Sick Leave Act, full-time employees are entitled to 80 hours of paid sick leave over a two-week period. If an employee is part-time, the employee is entitled to the number of hours of leave that is equal to the number of hours the employee works, on average, over a two (2) week period.
The Emergency Paid Sick Leave Act provides specific guidance for determining the number of hours of leave a part-time employee can take in a two-week period. Generally, a part-time employee is entitled to leave for his or her average number of hours worked in a two-week period. If an employee’s schedule varies to such an extent that an employer is unable to determine with certainty the number of hours the employee would have worked if such employee had not taken paid sick time under the Act, then the employee’s average daily hours should equal the average number of hours the employee was scheduled per day over the six-month period prior to the leave. This includes any hours for which the employee took leave of any type.
If the employee did not work in the preceding six-month period, the employee’s average daily hours should equal the “reasonable expectation” of the employee at the time of hire with respect to the average number of hours per day that the employee would be scheduled to work.
According to the DOL’s guidance, this same analysis can be used for full-time employees whose schedule varies from week to week.
If an employee is eligible for leave under the Emergency Paid Sick Leave Act, an employer may not require an eligible employee to exhaust existing paid time off, vacation time, or other paid leave allotment before taking leave under the Act.
As a practical matter, it is becoming increasingly difficult to travel to countries or regions of countries with widespread COVID-19 infections. Travelers should consult airline websites and should also check the website for the local health authority for up-to-the-minute guidance on travel restrictions. Some countries are reportedly considering closing their borders entirely, which might present the risk that an employee who travels to such a country remains unable to return home indefinitely.
For U.S. travelers, the CDC website provides guidance about the advisability of travel to countries that have been affected by COVID-19 which employers may consult in determining whether it is advisable to require or permit travel. Travelers should assess the risk profile of their destination country before they travel. Generally, the CDC has classified countries as levels one through three based on risk stratification criteria.
Areas subject to a Level 2 Travel Health Notice pose a sustained or ongoing risk of community transmission. Older adults or those who have chronic medical conditions should consider postponing travel to those destinations. As of March 11, 2020 all global travel became subject to a Level 2 Travel Health notice.
Areas subject to a Level 3 Travel Health Notice pose a widespread, sustained or ongoing risk of community transmission. Travelers should avoid all nonessential travel to those destinations. The CDC has issued a Level 3 Travel Notice for South Korea. The CDC recommends travelers returning from an area subject to a Level 3 Travel Health Notice stay home for 14 days from the time they left the area subject to the Level 3 Notice and practice social distancing.
The CDC has also issued a Level 3 Travel Notice for most of Europe, China, and Iran and has additionally suspended the entry of foreign nationals from those destinations into the United States. American citizens, lawful permanent residents, and member of their families may enter the United States but will be redirected to one of the following 13 airports for health screening:
- Boston Logan International Airport (BOS), Massachusetts
- Chicago O’Hare International Airport (ORD), Illinois;
- Dallas/Fort Worth International Airport (DFW), Texas;
- Daniel K. Inouye International Airport (HNL), Hawaii;
- Detroit Metropolitan Airport (DTW), Michigan:
- Hartsfield-Jackson Atlanta International Airport (ATL), Georgia;
- John F. Kennedy International Airport (JFK), New York;
- Los Angeles International Airport, (LAX), California;
- Miami International Airport (MIA)
- Newark Liberty International Airport (EWR), New Jersey;
- San Francisco International Airport (SFO), California;
- Seattle-Tacoma International Airport (SEA), Washington; and
- Washington-Dulles International Airport (IAD), Virginia.
Travelers should pay attention to communications from their airline, from local authorities, and from the U.S. government. U.S. citizens may enroll in the Smart Traveler Enrollment Program (STEP), which is a service of the Bureau of Consular Affairs of the U.S. Department of State that provides information from the local U.S. embassy about safety conditions in the country a traveler is visiting. The STEP program also helps the embassy contact U.S. citizens in an emergency.
Employees who are traveling should also know their foreign medical provider options and determine how to access those options. For companies whose workforces travel extensively, communication around this topic could be helpful.
The U.S. Department of Transportation (DOT) has issued an “Enforcement Notice Regarding Denying Boarding by Airlines of Individuals Suspected of Having Coronavirus” (or COVID-19). This enforcement notice advises the public that airlines may screen passengers during the check-in and boarding process for flights to the United States from countries with travel health notices issued by the CDC stemming from an outbreak of the COVID-19. If passengers seeking to travel from these countries to the United States display symptoms of COVID-19, airlines may deny boarding to them under certain circumstances.
Enhanced arrival procedures are in place for general aviation as they are for commercial travel. Passengers and crew may wish to consult the National Business Aviation Association’s (NBAA) COVID-19 operational considerations for the general aviation community which include more information about these policies as well as guidance related to the development of deviation and extraction plans for situations that might require an immediate adjustment of itineraries.
Many airlines are changing their refund policies and change fee policies related to travel cancellations causes by COVID-19. It is important before making any changes to scheduled travel to call the airline directly. Every airline has different policies, and they are currently quite fluid. While travel agents can sometimes be helpful in making changes, many travel agents, particularly at large online travel agencies, are not informed on the most recent policy changes that airlines have implemented, which may leave passengers subject to large charges that could have been avoided by dealing directly with the airline.
Travel insurance may also provide some recovery for losses incurred as a result of travel changes. Some travel insurance policies have an epidemic exclusion. COVID-19 was classified as an epidemic by the CDC on February 3, 2020, so policies purchased after that date may exclude coverage for changes prompted by COVID-19. Similarly, some travel insurance policies include a known-event exclusion. The known event date for COVID-19 is January 22, 2020.
If a traveler enters an aircraft and there are a lot of passengers who seem to be coughing or sneezing, concern is normal, but there are a number of other respiratory illnesses in circulation that cause sneezing and coughing. Travelers can take precautionary measures such as wiping their seat, seatbelt, tray, armrests, air vents, and light switches with disinfecting wipes. Travelers who visit the lavatory may wish to disinfect the handles and everything they touch within the lavatory. And travelers who are seated next to a visibly ill seatmate should request reassignment of their seat, if available. If you still have concerns, those should be addressed to the flight crew.
It is advisable for employers to develop a written policy on international travel and to treat all employees equally. Travel quarantines should not be determined on an ad hoc basis. While the CDC has not suggested international travel alone to a country not covered by a Travel Health Notice poses an appreciable risk that the employee has come into contact with someone who was infected with COVID-19, as travel restrictions increase, more areas are subject to self-quarantine upon return to the United States.
Business Continuity, Contracts, & Insurance
In areas where COVID-19 becomes prevalent, it is likely either that employees will request the opportunity to work from home, that businesses themselves will make the decision to close temporarily, or that local authorities could require businesses to close for a period of time. As a result, business continuity plans are critical. Many businesses are in the process of reviewing their plans to assess whether it adequately addresses the legal, business, and practical issues in the event of a voluntary or mandatory closure of business facilities.
For businesses that can be operated with employees working remotely, it is important to consider the adequacy of not only technical capabilities (e.g., adequate computer, monitor, internet for home set-ups), but also continued information security (e.g., adequate security tokens if most workers suddenly operated remotely). Businesses should work closely with their IT professionals to consider both practical preparations and risk assessment for potential data breaches.
Businesses should also reach out to their vendors and suppliers to assess their preparedness and planning. If a critical vendor or supplier is not adequately prepared, steps should be taken to mitigate risk of loss. Before suspending or terminating a relationship based on force majeure or other concerns, please consult legal counsel.
Unfortunately, there is not a simple yes or no answer to this question. However, we can provide you several factors to consider as you work with legal counsel to devise a strategy.
First, does the contract have a force majeure clause? Many contracts include force majeure clauses that may excuse a party’s non-performance. In the United States, the ability to declare force majeure is generally governed by the specific terms of the individual contract at issue.
- Governing law. An important initial issue to consider is what law governs the contract, because the scope and effect of a force majeure clause varies by jurisdiction.
- Fact-driven analysis. Whatever law governs, whether a force majeure clause will actually excuse a party’s non-performance is a fact-specific determination. In the case of the COVID-19 outbreak, some relevant facts include whether it is impossible to perform a contract because of a government regulation (e.g., a quarantine or mandatory travel restriction), or whether performance has become more difficult or expensive, but not impossible (e.g., a price hike caused by supply chain interruptions).
- Text of the FM clause. The particular language of the force majeure clause is also important. Depending upon the law that governs the contract, specific mention of “disease,” “epidemic,” “pandemic,” or “acts of government” may be more helpful than general terms such as “acts of God” and “matters outside of the reasonable control of the parties.”
- The long road. It is important to note that when a force majeure event is disputed, parties may not know the result until litigation has been concluded months to years later. As a practical matter, many businesses may focus on non-legal solutions that might mitigate the impact.
Second, do you have other grounds that could excuse non-performance? Even if there is no force majeure clause, there may be other avenues to potentially excuse non-performance. Some jurisdictions recognize impracticability and frustration of purpose as excuses for contractual-nonperformance. In addition, the UCC (as adopted in Texas) creates a limited statutory defense of impracticability for sellers in certain contracts for the sale of goods.
The specific policy language will determine the ability to recover. Coverage exists only when a loss occurs that is covered under and not excluded by the policy language. Some facts to be aware of:
- Impact of past outbreaks. Following the Severe Acute Respiratory Syndrome (SARS) outbreak, many insurers began excluding coverage for viral and bacterial outbreaks.
- Coverage analysis. Policies also often require direct physical loss or damage to covered property to trigger coverage for resulting business interruption losses, and whether contamination by an infectious disease meets this standard is likely to be the subject of coverage disputes in the days to come.
- Tender. Insureds who believe that they have a loss covered under a policy with business interruption coverage should consider tendering their loss to their insurer. We also recommend you consult with counsel in making the decision.
COVID-19 is impacting financial institutions and other lenders and their customers. In particular, it is affecting the origination of new financings and compliance with existing loan terms and contractual obligations.
New Financing Arrangements
Borrowers seeking new financing should pay careful attention to the following terms and conditions in the financing commitment and loan documents:
- Representations and warranties should be carefully reviewed to determine the effect COVID-19 may have on the borrower and its business and, in certain cases, representations and warranties should be modified to include materiality and knowledge qualifiers. In particular, borrowers should scrutinize any representations and warranties that are forward-looking.
- Financial covenants should be reviewed to determine whether the thresholds and testing periods for such covenants allow enough cushion for the borrower to forecast compliance with the covenants. Testing periods may need to be extended so that compliance is not monitored until a future date when the borrower may have more certainty as to whether their business will be able to absorb any adverse financial impact COVID-19 may have on the borrower’s operations and industry as a whole. Pre-approved cure rights (e.g., equity injections or other shock adjustments) should be negotiated into such covenants.
- Material adverse effect or change clauses should be carefully defined and limited so that the borrower understands whether the impact of COVID-19 can trigger such material adverse effect or change and thereby allow lenders the ability to terminate advances on a line of credit (and thereby constrain working capital) or call a default under the loan documents.
- Cross-defaults with other financing arrangements, contracts, or other agreements that may also be potentially affected or interrupted should be limited or eliminated.
- Defaults related to death or disability of individual borrowers and guarantors should be modified to allow the borrower to substitute loan parties that satisfy the lender’s underwriting standards.
- Notice and opportunity to cure periods should be examined to determine whether additional time may be necessary to cure a default caused by the COVID-19’s negative impact on the business’s financials or operations.
- Construction timelines and force majeure clauses should be reviewed and modified to extend or excuse delayed performance to accommodate for any future impact COVID-19 might have on labor, supplies, or materials in connection with a construction project.
Market flex provisions provide arrangers and underwriters with flexibility as to the terms of a financing following the execution of a financing commitment or facility agreement. Such provisions are typically included by arrangers to permit the lender to make changes to key terms of a financing (e.g., pricing, yield, terms, structure, conditions) to make such financing more attractive to potential syndicate lenders and loan participants. Given the current and future volatility in the markets resulting from COVID-19, lenders may include market flex provisions in new financing commitments to allow them the ability to terminate financing commitments or alter the terms of new financing transactions. Any such market flex provisions should be carefully reviewed and limited as to scope and applicability.
Lenders will likely change their focus to the amount and types of due diligence requested from a borrower in connection with a new financing commitment. To avoid delay in closing a new financing arrangement, borrowers should proactively assemble and provide lenders with information and supporting documentation in response to anticipated concerns surrounding the adverse effects of COVID-19 on their business. The following are examples of some of the additional questions and due diligence to consider:
- Whether the borrower operates or conducts business with counterparties in communities affected by COVID-19.
- Assessment of the borrower’s losses attributed to COVID-19 to date and projected losses that may arise.
- The ability of the borrower and the borrower’s counterparties to perform under existing contracts and the ability for one or both parties to suspend or terminate such obligations and any such negotiations that might be underway with respect to suspension or termination by either party.
- The ability of the borrower to collect accounts receivable and pay accounts payable.
- The adequacy of the borrower’s supply chain and inventory (and whether there are any alternative supply chains available).
- Whether the borrower is part of a regulated industry that is or might be subject to new regulations and restrictions, and if so, whether the business is in compliance with such new regulations and restrictions and has adopted a policy or procedure for monitoring and implementing the ongoing modifications and updates to such regulations and restrictions.
- The existence and modification of any business continuity, disaster recovery and response policies, cybersecurity policies and procedures, and other crisis management procedures.
- The existence and viability of a succession plan with respect to key principals and managerial officials.
- The existence and scope of any business interruption or other applicable insurance.
- The applicability of any required third-party or governmental approvals that may be necessary to close the transaction and the potential delay in obtaining such approvals.
Existing Financing Arrangements
With encouragement and support from the government and financial regulators, lenders will likely take a pragmatic approach and work with borrowers to meet their needs and mitigate the effect of COVID-19 on their business, while maintaining safe and sound lending practices. Early and thoughtful dialogue and open lines of communication between borrowers and lenders is critical, and will allow all affected parties to prepare for the next steps in an ever-changing environment.
Borrowers should review the following terms and conditions in the credit agreement and other loan documents:
- Principal and interest amortization/repayment schedules.
- Ongoing representations and warranties to determine the accuracy or potential breach thereof.
- Affirmative covenants related to information undertakings to proactively prepare for a lender’s request for further information regarding the financials, assets and operations of the borrower. Also, obligations to provide notice to lender of any default by borrower or a third party under any material contract (e.g., material supply contract, lease agreement, construction contract).
- Material adverse effect or change definitions and applicability to representations and warranties, cessation of advances under a line of credit, and events of default.
- Financial covenants and the thresholds and testing periods related thereto. Testing periods may need to be extended so that compliance is not monitored until a future date when the borrower may have more certainty as to whether their business will be able to absorb any adverse financial impact COVID-19 may have on the borrower’s operations and industry. Pre-approved cure rights (e.g., equity injections or other shock adjustments) may need to be added to such covenants.
- Events of default triggered by a material adverse effect or change, insolvency, suspension or cessation of business, cross-default with other financing arrangements, contracts, or other agreements, death or disability of an individual borrower or guarantor, or lender’s insecurity.
- Obligations of the borrower to the lender to indemnify and reimburse the lender for fees, costs, and expenses (and, if applicable, losses and liabilities) associated with the lender’s investigation and addressing of any defaults, as such obligations and liabilities may present a financial burden on businesses experiencing cash constraints.
- Set-off clauses affording the lender the right to seize funds from the borrower and the guarantor in the event a default occurs under the loan documents.
- Financial reporting, including audit, requirements. Delays in delivering required financial statements and qualifications to an audit may trigger an event of default. Also, auditors may require credit waivers or forbearance agreements to issue the audit.
Borrowers should be proactive in light of the COVID-19 crisis. Depending on the circumstances, borrowers may need to request that their lenders enter into amendments to accommodate significant changes in the borrower’s business and the borrower’s ability to meet its obligations under the loan documents. These amendments may be short-term or medium-term, or in some instances permanent, modifications depending upon the nature of the covenants and the potential impact of COVID-19 on the borrower’s business.
Borrowers may also request that the lender issue a waiver letter concerning the specific default or breach, or any forecasted default or breach. If necessary, a forbearance agreement may be needed to give the borrower’s business sufficient time to recover from the COVID-19 crisis. Borrowers should consult with legal counsel when negotiating and documenting any amendments, waivers, forbearance agreements, and other loan modifications.
Information last updated March 24, 2020
These materials are made available by Jackson Walker for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.