March 23, 2020

– Governor Phil Murphy signed Executive Orders 107 and 108 effective at 9:00 PM March 21, 2020, closing all non-essential retail businesses , requiring all businesses to implement “social distancing” procedures, and invalidating any conflicting county or municipal restrictions, as part of the State’s continuing efforts to mitigate the effect and spread of the COVID-19 pandemic. Executive Order 107 also directs all New Jersey residents to stay at home except for certain exempt activities (like obtaining food, medical care, and reporting to work) and prohibits social gatherings and events unless otherwise authorized by the Order. During this rapidly-changing environment, CK clients have turned to us to help navigate our new, albeit temporary, normal. More pointedly, New Jersey employers are concerned about how this Executive Order will impact their businesses.

What options do I have to reduce my compensation expense during the crisis?

Regardless of whether your business is considered essential or non-essential, you may need to consider measures to reduce your compensation expense. As the demand for services in sectors across the economy decreases and businesses experience revenue declines, business owners and management are considering the full range of measures to ensure that they emerge from the crisis as a viable operation. The most common options are:

–Reduced Work Hours
–Reduced Pay

Each of the forgoing options are permissible if implemented in a manner that is consistent with otherwise applicable labor and employment laws. Employers must consider the potential impact of the forgoing options on overtime exemptions in particular, as a pay cut or furlough may inadvertently result in the re-classification of overtime-exempt employees as non-exempt, with significant financial consequences. Employers must also ensure that any personnel action is effectuated and documented in a non-discriminatory manner and consistent with applicable contractual obligations. While the landscape of this crisis is ever-changing, employers can mitigate the risk of further disruption and potential liability by conferring with counsel and communicating regularly with their employees.

Are businesses required to pay employees who are unable to work due to the coronavirus crisis, and what is the impact of the new federal paid leave law?

In general, employers are not required to pay non-exempt employees who are unable to work. Employers are required to pay exempt employees their full salary for every workweek in which work is performed. Employers must be aware that “work” includes answering a work-related telephone call and/or sending a work email. Moreover, employers must continue to comply with applicable state and federal paid leave laws. Employers are required to provide paid leave to both exempt and non-exempt employees when they are unable to work in a number of circumstances, many of which are squarely applicable during this crisis.

On Wednesday, March 18, 2020, Congress and President Trump provided some clarity and some assistance to employers and employees in dealing with this unprecedented and swift sea change through passage of the “U.S. Families First Coronavirus Response Act” (“FFCRA”). The Law goes into effect April 2, 2020, 15 days after it was signed by the President. If the past 15 days are any indication of the unpredictable nature of this pandemic, the world may look different by the time the Law becomes effective. Employers should be proactive and anticipate implementing policies that incorporate additional new legislation.

The FFCRA generally requires employers with fewer than 500 employees to provide up to 80 hours of paid sick time to employees that are unable to work due to the crisis, including employees that take time off to (1) care for a child whose school or child care provider is closed or unavailable, (2) care for oneself of seek medical attention due to experiencing COVID-19 symptoms, and/or (3) care for another person who is subject to quarantine. The law also requires these employers to provide an additional 10 weeks of paid family leave to employees that cannot work due to the need to care for a family member.

The law applies to full-time and part-time employees, and the rate of pay during such leave depends on the nature of the leave taken. Certain exceptions apply, including businesses that employ healthcare and other essential workers, as well as businesses with fewer than 50 employees that would experience an unsustainable hardship. Under the Act, the federal government will reimburse employers 100% through tax credits for qualifying wages paid under the law.

As is the case with any personnel action, employers should consult with counsel to ensure that any decision not to pay an employee is consistent with otherwise applicable labor and employment laws and contractual obligations (including union agreements), and effectuated in a non-discriminatory manner. Employers should update their postings to include the new FFCRA notice and speak with counsel to discuss their options and obligations. CK’s premier Employment Litigation and Counseling attorneys are on the forefront of these emerging issues, and their substantial collective experience makes the team uniquely qualified to assist New Jersey employers at this uncertain time.