Understanding the Intersection of FLSA and FFCRA in the Age of COVID-19

Like Alice’s journey through Wonderland, navigating a world that’s trying to restore normalcy in the thick of a pandemic has shown us a mix of heroism and surreal trials. The lingering chaos visited on the world by COVID-19 is at last abating, but the persistent challenges of restoring work and bolstering the economy remain. Federal contractors and small businesses are still trying to make sense of the emergency relief measures introduced by labor regulators. We recently attempted to clarify the somewhat confusing rules attached to emergency paid leaves, but companies continue to stare down the obscurities of overlapping policies, such the Fair Labor Standards Act (FLSA). Many business leaders have raised questions about how the entrenched and mostly unaltered role of the FLSA comes into play with the new requirements contained in the Families First Coronavirus Response Act (FFCRA). Do they conflict? Does one supersede the other? And if so, how do companies maintain compliance? Let’s leap into this rabbit hole and see what’s taking place on the other side of the looking glass. 

Recapping the Families First Coronavirus Response Act

Although the world knew of the coronavirus outbreak in December 2019, many nations, including the United States, had only a vague notion of the disruption that COVID-19 would wreak until it landed on their shores. In rapid succession, the disease went from sporadic clusters of transmissible infection to epidemic and finally pandemic. The momentum continued to gain steam, leaving health and government officials scrambling to slow its course. However, the world united in devising an approach to containment that, by many accounts, produced dramatic results in a matter of weeks. We’re now left with the task of tidying up the fallout left in the wake of economic uncertainty. 

For its part, the federal government has mobilized to provide relief packages intended to benefit employers and their workforces. The deterioration of jobs due to shutdowns and imposed quarantines has become a serious concern. Just last week, another 3 million U.S. workers filed for unemployment. Business owners are also fighting to stay solvent. The need to stanch the hemorrhaging is urgent, yet the introduction of new labor acts has often raised more questions than answers. 

Under the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act, both part of the FFCRA, employees may receive paid leave taken for reasons specific to the COVID-19 crisis. The act also includes provisions to prevent cash-strapped small businesses from suffering greater financial hardships resulting from the increased costs. 

FFCRA strives to alleviate the monetary pressures confronting small businesses, including government contractors, and their workforces during the pandemic. For workers, the act strives to maintain a steady stream of income to prevent them from working in unsafe conditions or sacrificing their pay to obey social distancing measures and quarantines. Although employers must bear these additional costs upfront, the FFCRA will reimburse them through tax credits, as described in the WHD’s April ruling.

But small businesses must still adjust to the new rules while reconciling them with existing laws like FLSA, which have further complicated adoption and execution.

Exempt vs. Non-exempt

The first step in understanding the FLSA involves determining whether employees are exempt or non-exempt from collecting overtime pay. The standards for classifying workers are detailed, as illustrated by the Department of Labor (DOL). Following is a more concise overview.

To be considered exempt, three essential determinations must be made.

  1. Does the employee earn a salary?
  2. How much does the employee earn per week or per year?
  3. Does the employee’s role require certain responsibilities or functions that the Department of Labor (DOL) considers exempt duties?

Employees must meet all three of the tests above to be exempt from FLSA coverage. An employee passes the test if:

  • The employee receives pay on a salary basis.
  • The employee earns at least $35,568 per year or $684 per week. Beginning January 1, 2020, the salary threshold increased from $455 per week or $23,600 per annum, making a number of previously exempt employees nonexempt.
  • The employee performs exempt job duties.

Exempt duties typically include these roles:

  • Executive
  • Administrative
  • Learned Professional
  • Creative Professional
  • Computer Professional
  • Outside Sales

The duties associated with managerial roles must also be determined. Managerial responsibilities typical indicate that the worker:

  • supervises other employees;
  • performs corporate management duties as a primary job function;
  • has input in other workers' employment such as hiring, firing, and promotions.

Understanding How FLSA and FFCRA Intersect

Differences in What Each Act Covers

The biggest aspect of grasping the dual roles of FLSA and FFCRA paid emergency and family leaves comes down to the nature of pay. In a nutshell, FLSA covers an employer’s legal obligations for employee earnings, taxes, and working hours. FFCRA covers leaves taken outside of normal circumstances because of COVID-19.

The adoption of the Fair Labor Standards Act of 1938 (FLSA) changed the face of employment. Prior to World War II, workers functioned more like independent contractors. They were responsible for their own benefits, their own taxes, and they worked under limited standards for hours, job security, and wages. 

The FLSA set a national minimum wage, established maximum working hours, and enforced child labor protections. Moreover, the federal government began pressuring employers to recognize their workers’ rights to membership in the burgeoning unions of the time, which led to employer-sponsored benefits, vacation pay, and income tax withholding. 

  • At its essence, FLSA establishes what employers must legally pay their workers (i.e., minimum wages) and under what time-based conditions (overtime for non-exempt employees who exceed the maximum work hours set by law). That hasn’t changed during the pandemic. 
  • The FFCRA, on the other hand, introduces provisional policies for compensating workers in small companies (under 500 people) who must take leaves specific to COVID-19, which include isolations ordered by government or health providers, the unavailability of telework options, issues with child care, or the need to assist family members affected by the disease. FFCRA is also considered a temporary fix and expected to sunset after the pandemic has passed.

Paying Workers When Businesses Close

As the DOL explained, “The FLSA generally applies to hours actually worked. It does not require employers who are unable to provide work to non-exempt employees to pay them for hours the employees would have otherwise worked.”

If, under the FFCRA, employees are eligible to receive paid leave during the crisis, the question becomes: do employers have to offer paid sick leave if the business has closed? The short answer is no. The Temporary Rule makes clear that employees cannot take FFCRA paid sick leave when an employer does not have work for the employee, even if the lack of work is because of COVID-19.

Maintaining Exempt Status During Closure

Salaried (i.e., exempt) employees must receive their full salary for any week in which they performed work, with very few exceptions. The FLSA does not require employer-provided vacation time. But if a private employer offers bona fide vacation time to its workers, that company may direct its exempt staff to take vacation during an office closure, whether for full or partial days without compromising their status, so long as the employees receive payment equal to their guaranteed salary.

One interesting wrinkle is that an exempt employee with no more accrued vacation benefits still must receive their guaranteed salary for any “absence(s) occasioned by the office closure” in order to remain exempt, where work is rendered.

What’s important to remember is that exempt salaried employees are not required to be paid their salary for weeks in which they performed no work. Employees also will not be considered paid “on a salary basis” if deductions from their compensation are levied for “absences occasioned by the office closure during a week in which the employee performs any work.” 

Telework and Compensation

The DOL’s Wage and Hour Division (WHD) has encouraged businesses to be supportive and flexible with workers impacted by quarantines. Where possible, the government urges federal contractors and small businesses to extend alternative work arrangements, such as teleworking, to employees who can perform their jobs remotely.

Telework has already proven itself effective as an infection-control and prevention strategy. It also may be considered a reasonable accommodation. However, if employers single out some employees to telework while others must continue reporting to the office, on a basis prohibited by any of the EEO laws, they may find themselves on the hook for a discrimination case.

So, do employers have to pay regular wages for teleworking employees? Yes. 

  • Under FLSA, they must continue to be paid their prevailing rate for all hours worked, whether at home or in the office, which includes the same overtime provisions for non-exempt employees. Exempt individuals, meanwhile, must continue to earn their predetermined salaries.
  • If telework is being provided as a reasonable accommodation for qualified individuals with a disability, then businesses must pay the same hourly rate or salary to those employees.
  • If telework is being provided as a requirement of a union or employment contract, then businesses must pay the same hourly rate or salary to those employees.

What About Service Contract Act Pay?

Many employees of federal contractors have pay structures secured by the Service Contract Act (SCA). These companies may wonder if anything has changed because of the coronavirus outbreak. In large part, no. 

Nothing in the FLSA, its regulations, or interpretations overrides or nullifies any higher standards provided by SCA. state, or local laws that regulate the payment of wages.

What Role Does OSHA Play in Telework?

It’s a weird but intriguing question. The DOL’s Occupational Safety and Health Administration (OSHA) currently has no formal regulations regarding telework and injuries in home offices. In February 2000, when remote working started accelerating, OSHA said that it wouldn’t conduct inspections of employees' home offices, wouldn’t hold employers liable for employees' home offices, and didn’t expect employers to inspect the home offices of their employees.  

If an employee makes a specific request about home office conditions, OSHA may inform the business about the complaint, but it generally won’t follow up with either party.

That said, employers who are required to keep records of work-related injuries and illnesses must continue to record such incidents, even when they occur in a home office.

When Does FFCRA Paid Sick Leave Apply?

As we outlined in our article about FFCRA leave rules:

  • the act applies to companies with fewer than 500 employees;
  • large businesses are generally exempt; 
  • businesses with fewer than 50 employees may qualify for an exemption if “the leave requirements would jeopardize the viability of the business as a going concern.”

Paid Sick Leave is an additional employee benefit to supplement the employer’s general leave policies. It does nothing to alter regulations governing businesses under the FLSA, even though it requires employer-paid leaves under specific circumstances. Paid Sick Leave is, at its core, an additional employee benefit to supplement the employer’s general leave policies. Here are some important distinctions to keep in mind.

  • Employers can’t require employees to use other available paid leave (such as vacation or earned sick days) before using their FFCRA Paid Sick Leave. 
  • However, if permitted by an employer’s existing FMLA policy, businesses may require employees to use their Expanded FMLA leave concurrently with available vacation, personal time, or paid time off. 
  • The Expanded FMLA Leave used by an employee counts toward the 12 weeks of general FMLA leave to which the employee may be entitled in a 12-month period.
  • Businesses will not receive tax credits and reimbursements for paid leaves outside of the FFCRA, in this context.
  • Businesses are not required to pay salaried or hourly employees for days/weeks in which they had no work.
  • Businesses also are not required to offer emergency paid leave to workers if the businesses have closed. FFCRA applies only to individuals who are currently employed in operational companies.

Stay Tuned for More

New and existing employment laws will endure as a crucial part of the government’s overall economic relief package. Throughout this series of posts, we’ll continue to explore the complications and strategies for government contracting in the era of COVID-19. We hope you’ll stay tuned.

Image courtesy of Vanessa Santos, submitted for United Nations Global Call Out To Creatives

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