What the Order Says – and Doesn’t Say

Effective March 19, 2020 Governor Newsom issued an Executive Order (the “Order”) directing all individuals living in California “to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors.” This order is in place until further notice.

The Order also states that any Californian whose job relates to maintenance of critical infrastructure may leave their home to do this work. The federal government has issued guidance on what infrastructure it deems critical which can be found here: https://www.cisa.gov/identifying-critical-infrastructure-during-covid-19. As it relates to these sectors, please note the following:

§ The guidelines published by the federal government identifying critical infrastructure are meant to assist state and local authorities maintain the continuity of operations for these 16 sectors.

§ The guidance is not binding, is not an official executive action of the US Government and does not change existing statutes or executive action.

The Order indicates that people can leave their homes or residence to perform a function related to critical infrastructure, or to “otherwise facilitate authorized necessary activities” but the Order does not define what is meant by authorized necessary activities. The website CA.gov (not the Order itself) indicates that residents are ordered to stay at home at their place of residence except to get food, care for a relative or friend, get necessary health care, or go to an essential job. If residents go out, they must keep at least six feet of distance from others.

The website CA.gov indicates the following essential services will remain open:

  • Gas stations
  • Pharmacies
  • Food: Grocery stores, farmers markets, food banks, convenience stores, take-out and delivery restaurants
  • Banks
  • Laundromats/laundry services

The Interplay between State and Local Government Orders

In the absence of specific direction from the Order on what are “authorized necessary activities” we must look to local orders for this guidance.

Each California County has orders or guidance in place regarding the pandemic. Many “stay at home” or “shelter in place” orders are similar, but there are some differences between counties. The State of California’s website has a link to each county order, which is updated regularly: https://covid19.ca.gov/state-local-resources/#top

We recommend all individuals consult their local orders to determine the scope of “shelter in place”. Businesses should review its County order to determine if yours is “essential” and contact us for further guidance.

Changes to Your Workforce

Whether or not your business is deemed “essential," you may be considering changes to your workforce for employee safety and in response to the undeniable economic impact of the pandemic. We suggest you consider all available options carefully before deciding and refer to the following chart for an overview, with details below the chart. Whether notice is legally required as detailed below, we recommend all employers provide written notice to employees of their decision, the reason and assurance that these measures are only being taken in response to the pandemic and with the ultimate goal of returning to business as usual in the near future. Goodwill toward your employees will go a long way in rebuilding.

Option Description Important Information
Furlough §  Temporary suspension of employment during which employees do not receive wages.  §  Notice may be required under CA WARN
§  Those on furlough remain employed  §  Advise employees they must not work during the furlough period and consider keeping employer issued mobile devices and limiting email access.
  §  Employees continue to receive health benefits.  
  §  Employer may restrict the use of vacation/PTO during furlough.
  §  Employee is entitled to use CA Paid Sick Leave (“PSL”). 
  §  Employee is entitled to federal sick pay under the Families First Coronavirus Response Act “FFCRA”.
     
Layoff/Termination         A layoff means a separation from a position for lack of funds or lack of work. (LC 1401(c)). §   No notice required unless CA WARN required. 
  §   Final pay due on last day of work including all earned but unused vacation or PTO.
A termination is a complete and permanent separation of employment. §   You do not need to pay out sick time and your employees would not be eligible for federal sick pay (FFCRA).
  §   If you layoff or terminate a salaried employee, you need only pay them through the final day’s work.
  §   Provide timely notice regarding COBRA benefits.
  §   See below regarding potential notice requirements under CA WARN. 
     
Reduction in Pay Reducing an employee’s hourly rate or prospective salary  §   Ensure you pay hourly employees minimum wage: $12/hr (25 or less employees) and $13/hr (26 or more).
§   Reduction in exempt salary may result in future loss of the employee’s exempt status.(*See further discussion below under the section on Reduction in Salary).
§   You may only reduce pay going forward, and if possible, give 7 days’ advance notice. 
     
Reduction in Hours Reduce hours for non-exempt employees and pay only the hours worked. §   Take care not to reduce hours in a way that appears discriminatory – such as only for higher paid (and generally older) workers.
§   Employees may receive Unemployment  Compensation Insurance.
 
     
Work From Home  An employee is permitted to work remotely (out of the office), generally by accessing employer files through a virtual desktop. §   Employers must reimburse for such expenses as home internet, cell phone usage, printer ink, paper, and other relevant supplies. Demand proof of incurred expenses.
§   Send clear directives to non-exempt employees to take and record rest breaks and meal periods.

What Should You Do?

With many employers facing the difficult decision of whether to furlough or lay off employees, the critical question is the expense associated with each choice. If you have a generous vacation policy, and many tenured employees with banks of hours, it may be more expensive to lay off employees because you would be required to pay out all earned vacation. If you furlough employees, you must maintain benefits and pay sick leave as requested. Your business also may be required to pay sick leave under the new federal law. You may consider layoff or furlough of some employees and reduction in hourly pay or salary for others.

Reduction in Salary

A predetermined regular salary reduction, for a bona fide business reason (such as the pandemic), and not related to the quantity or quality of work performed, will not result in loss of an employee’s exempt status, as long as the employee still receives the minimum California salary requirement of $54,080 annually.

You may decide that because the future of your business is uncertain due to the pandemic, the loss of exempt status for employees is not important. This means that if you reduce salary and later are sued by the employee claiming he/she is now non-exempt and is due unpaid overtime and/or penalties for or missed meal or rest periods, you may not be able to claim that employee was exempt.

If you decide to reduce an exempt employee’s salary, rather than lay that person off completely, keep in mind the following: An employer must pay an exempt employee the full predetermined salary amount for any week in which the employee performs any work without regard to the number of days or hours worked. However, there is no requirement that the predetermined salary be paid if the employee performs no work for an entire workweek. Deductions may not be made from the employee's predetermined salary for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing, and able to work, deductions may not be made for time when work is not available.

That said, if yours is an “essential” business and remains open, and your employees can be put to work, an exempt employee who elects to stay home due to the pandemic and does not perform any work on that day (unless working remotely), is considered absent for personal reasons and need not be paid for that day. Deductions from salary for absences of less than a full day for personal reasons or for sickness are not permitted. If an exempt employee works any portion of a day, there can be no deduction from salary for a partial day absence for personal or medical reasons.

If you choose to lower salaries, you may implement the change as of the next payday. We also suggest that you inform the employee in writing with a clear explanation that the reduction is due to COVID-19, and without the reduction, the employee could be subject a layoff.

California Paid Sick Leave (PSL)

While it is well settled that employees can use PSL Paid sick leave (1) if they are sick for any reason, including COVID-19; and (2) to seek care or treatment of an existing health condition for the employee or the employee’s family member, what is less certain is the impact of California’s stay at home orders as it relates to preventative care, which is another reason an employee can take PSL.

According to the California Labor Commissioner, “preventative care” may include self-quarantine as a result of potential exposure to COVID-19 if quarantine is recommended by civil authorities. This guidance is not particularly helpful because it appears to require potential exposure to COVID-19. As we work in an employee friendly state, we expect that after the pandemic has (hopefully) resolved, courts may interpret the need for preventative care to include mandatory stay at home orders such that employees are entitled to PSL in the wake of the California statewide Order. Ultimately, if the payment of sick leave will cause the financial collapse of your business, future lawsuits may not be a concern, but it is important to consider the potential for claims by your employees.

New Federal Sick Leave Law

The Families First Coronavirus Response Act (“FFCRA”) is effective April 2, 2020. Employers of up to 500 employees are required to provide Emergency Paid Sick Leave (EPSL) to their employees without regard for eligibility or time worked requirements. Please note, if you allow an employee to go on leave (whether paid or unpaid) or furlough an employee (as opposed to a layoff), then your employees are entitled to this EPSL.

Reasons for leave:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19 – note this would include any employee subject to a shelter in place order provided they do not work for a business providing an essential service. If your employees are working because they are providing an essential service, then the employee could not use EPSL to take time off for this particular reason. The following reasons may still apply.
  2. The employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to an order as described in subparagraph 1 above or has been advised as described in paragraph 2 above.
  5. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Hours of paid leave:

  1. Full Time – 80 hours
  2. Part Time – average hours for a 2-week period.

If you intend to have employees remain on staff who would be eligible for EPSL, contact one of our attorneys so we can guide you through how much to pay. Your business may be entitled to tax credit for providing this type of leave.

As this law applies to employers with up to 500 employees, you may have questions about how this total is calculated. If under the FMLA, your company and subsidiaries are considered integrated then it is true for FFCRA. FMLA follows Title VII guidance for whether subsidiaries are integrated. The factors to consider are:

§ interrelation of operations, i.e., common offices, common record keeping, shared bank accounts and equipment;

§ common management, common directors and boards;

§ centralized control of labor relations and personnel, i.e., hire and fire employees; and,

§ common ownership and financial control.

The factors are not evaluated as stand-alone. The entire relationship is to be reviewed in its totality.

Here is a link to details on the FFCRA: https://www.grsm.com/publications/2020/families-first-coronavirus-response-act-what-employers-need-to-know.

The full text of the act is here: https://docs.house.gov/billsthisweek/20200309/BILLS-116hr6201-SUS.pdf . The Emergency Paid Sick Leave act begins at page 46.

California WARN Act

Please note that further guidance from the Labor Workforce Development Agency on CA WARN is expected on March 23, 2020. For now, this is what we know:

In California, a WARN act notice is required 60 days in advance for a plant closure or layoff of 50 or more employees within a 30 day period or relocation of at least 100 miles for employers with 75 or more full and part-time employees employed for at least 6 months of the 12 months preceding the required notice.

Due to the ramifications of Covid-19, as of March 17, 2020, by California Executive Order, written notice should be given to employees regarding the nature of the layoff, termination or reduction in force – even though the 60 day notice period is not feasible. Further guidance is forthcoming by March 23, 2020. In the meantime, the order requires:

Notice must be given to:

(1) The employees of the covered establishment affected by the order;

(2) The Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs.

The Notice must be given as soon as practicable and includes the following information:

(1) A brief statement of the basis for reducing the notification period, including that COVID-19 related business circumstances were not reasonably foreseeable as of the time that notice would have been required; and

(2) the statement “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at labor.ca.gov/coronavirus2019.”

Unemployment Insurance

Here are good resources for your employees: https://www.labor.ca.gov/coronavirus2019/#chart and https://edd.ca.gov/about_edd/coronavirus-2019.htm