Impact of COVID-19 on Wages and Salaries & Related Legal Issues
The COVID-19 outbreak has placed heavy burdens on both employers and employees. An employer may be concerned about keeping their business running during the economic downturn, while an employee may be concerned about receiving the paychecks on which they rely to support their family. The Fair Labor Standards Act (FLSA) is the main federal law that governs the wages of employees. Many state and local governments impose additional requirements, such as setting a higher minimum wage. The FLSA and other wage and hour laws typically separate employees into two groups, known as exempt and non-exempt employees. The group to which an employee belongs will affect their right to continue being paid if their work has been disrupted during the COVID-19 outbreak.
Employees who get sick or lose their jobs also may be worried about the impact on their financial security. They should be aware that new federal laws provide many employees with a right to paid sick leave if they get sick or are affected by the outbreak in certain other ways. The federal government also is bolstering state unemployment benefits to help protect workers who suffer job loss. You can read more here about paid sick leave, and you can read more here about the unemployment benefits that you may be able to obtain if you lose your job.
Non-exempt employees are employees who are covered by the provisions of the FLSA. This law sets minimum wage and overtime rules, but these rules are tied to the number of hours that an employee works during a work week. For example, an employee is owed overtime pay at the rate of one and a half times their regular pay for each hour worked beyond 40 hours in a work week. You can read more here about wage and hour and overtime laws.
Thus, an employer generally does not need to pay wages as required under the FLSA if a non-exempt employee is not working. An exception may apply if an employment contract, a collective bargaining agreement, or an enforceable employer policy imposes rules for a specific situation. An employer also may not want to stop paying employees who are not working due to the COVID-19 outbreak, even if they are not legally required to pay them. This could undermine employee morale and result in poor publicity for the business.
Some non-exempt employees work on a fluctuating work week basis. The FLSA provides separate rules for this group of employees, whose working hours vary each week. They are paid a certain “fluctuating work week salary” for any week in which they perform any work. This rule does not change during the COVID-19 outbreak.
Exempt employees are employees who are not covered by the provisions of the FLSA and thus are not subject to wage and hour requirements. While the difference between exempt and non-exempt employees can be complicated, exempt employees generally consist of administrative, executive, and professional workers. People in the computer industry and outside sales workers are also exempt employees. The job duties, rather than the job title, determine whether an employee is exempt.
In most cases, an exempt employee must be paid their full salary for a work week if they perform any work during that week. If an employee refuses to go to work and performs no work on a day when the employer is open for business, they might not be entitled to receive their full salary. An employer might consider deducting this time from an employee’s accumulated vacation time. This option is not addressed by the FLSA, but it may be addressed by an employment contract, a collective bargaining agreement, or an enforceable employer policy. Again, an employer that is contemplating not paying an employee, while retaining that employee, may want to consider whether this is worth the potential damage to the employment relationship.