With customers staying home, employees working remotely and some businesses temporarily closing, we wanted to provide North Carolina business owners and managers with some possible options on how to manage and pay employees during this time. As you know, this situation is changing and evolving rapidly; as new options and resources evolve, we will provide additional information.
**We are also closely monitoring pending legislation – the Families First Coronavirus Response Act, which has passed in the U.S. House and is currently pending in the U.S. Senate. Among other things, the Act may require businesses to provide payment to employees for leave to self-isolate due to a Coronavirus diagnosis, to obtain medical care for Coronavirus symptoms, or to comply with quarantine requests or orders. We will provide additional guidance on this Act, as soon as possible. We expect to see movement in the next 24-48 hours.
NOTE: Before you make any changes discussed below, please contact us or your legal counsel to discuss the option that best fits your situation, the legal requirements to implement your decision and how to protect you from possible liability exposure in connection with your decision.
Options to Consider
Of course, if you can continue to operate under your usual terms, please do so. However, if you need to make some changes in order to continue operations effectively, here are some options to consider and discuss with legal counsel:
- Reduce Wage Rates or Salaries. For an employer that needs to continue operations, but needs to reduce costs, you could consider reducing employee wage rates and/or salaries on a temporary basis. Although not a popular option with employees, this could, however, allow employers to keep as many employees on payroll as possible in lieu of implementing layoffs. Before doing so, however, you need to confirm (1) that a pay rate change does not breach any existing employment agreement or collective bargaining agreement (for unionized facilities); (2) that you are not reducing an employee’s wages to less than minimum wage (plus overtime); (3) that you have provided notice to employees about a wage reduction that is required by law before the changes go into effect; (4) whether your current PTO, vacation, sick leave and/or any other paid leave benefits would apply to this period of reduced wages so that employees could supplement their wages; and (4) that your decision on who receives a wage reduction is not discriminatory, does not have a discriminatory impact, and otherwise is not likely to be perceived as discriminatory by employees.
- Reduce Work Schedules. For an employer that needs to continue operations, but at a reduced level, you could consider revising employee work schedules to reduce the number of hours worked. Before doing so, however, you need to (1) confirm that a schedule change does not breach any existing employment agreement or collective bargaining agreement (for unionized facilities); (2) work with your benefits broker and/or carrier regarding full-time employees who may no longer meet the eligibility requirements for continued insurance benefits due to the schedule change; (3) confirm that you have provided notice to employees about a schedule change that results in an overall wage reduction that is required by law before the change goes into effect; (4) determine whether your current PTO, vacation, sick leave and/or any other paid leave benefits would apply to this period of reduced work schedules so that employees could supplement their wages; and (5) confirm that your decision about who receives a schedule reduction is not discriminatory, does not have a discriminatory impact, and otherwise is not likely to be perceived as discriminatory by employees. The NC Governor, today, issued an Executive Order providing that employees whose work schedule is reduced in connection with COVID-19 may be eligible to apply for unemployment benefits.
- Implement a Temporary Furlough. For an employer that needs to continue operations, but at a reduced level, or an employer that needs to shut down operations temporarily, you could consider a short-term, unpaid, required leave of absence for all employees or certain positions. Before doing so, however, you need to (1) confirm that a furlough does not breach any existing collective bargaining agreement (for unionized facilities); (2) work with your benefits administrator, carrier and/or Human Resources support regarding continued health insurance benefits under COBRA or NC’s state continuation laws during the furlough; (3) determine whether your current PTO, vacation, sick leave and/or any other paid leave benefits would apply to furlough period; (4) determine whether you need to provide any exempt employees with payment for the entire workweek as required by NC and federal wage and hour laws; (5) confirm that you have provided notice to employees about a layoff that is required by law; and (6) confirm that your decision on who is furloughed is not discriminatory, does not have a discriminatory impact, and otherwise is not likely to be perceived as discriminatory by employees. If you have questions about whether an employee is exempt or non-exempt, please contact us to discuss. Remember, paying an employee a salary does not mean that they are exempt from overtime. For some general information on exemptions, please see our previous blog article HERE, which provides a link to the DOL fact sheets on common exemptions. The Department of Labor has also provided guidance on wage payment requirements.
What About Layoffs?
For a business that feels that a layoff may be the best option given their circumstances, we wanted to provide a few answers to some common questions:
- Is Severance Pay Required by Law? If you choose to layoff an employee, severance pay is not required by law in North Carolina unless you have an established policy in place; however, providing severance pay is a common practice in a layoff scenario. Additionally, if you want employees to sign a release of claims at the time of their separation, you must provide some consideration to the employee to support the release, which is often a severance payment.
- Are there any Required Terms for a Release of Claims? We would recommend that you have an attorney prepare or review a release of claims that you provide to employees in the event of a layoff; the process is usually different when you are terminating more than one employee. Generally, depending on the size of your business (i.e. the number of employees), in order for a release to be enforceable, you need to provide employees who are over 40 years old with at least 45 days to review the release document, certain information about their legal rights related to signing a release of claims document, the criteria you used to determine who would be selected for a layoff, as well as information about the group of individuals you considered as part of your layoff decision, who you ultimately chose to layoff and the ages of each of these individuals.
- Are Employees Eligible for Unemployment Benefits? Yes; in North Carolina, generally, an employee who is laid off from work through no fault or misconduct of their own, is eligible to apply for unemployment benefits. The NC Governor just issued an Executive Order providing that employers who lay off employees in connection with COVID-19 will not be held responsible for these claims. Unemployment benefits can be filed online with the North Carolina Division of Employment Security HERE.
Other Possible Resources for Employers?
- Contact your commercial banker to discuss use of your existing line of credit or to discuss a new loan to temporarily cover payroll and expenses.
- Contact your commercial insurance broker to discuss whether you have any insurance coverage that could provide some support.
- Monitor the SBA regarding possible disaster assistance and loans HERE. Note that as of today, North Carolina is not listed as an area eligible for SBA disaster loans.
If we can provide any guidance or assistance as you prepare your management plans during this time, please do not hesitate to contact us.