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Employers Take Note: Litigation Surging Because Of Covid-19

Hey Compliance Warriors!

We’ve been talking about this for weeks, and it’s really starting to kick off now. The litigation against businesses for mismanaging the Covid-19 pandemic is getting worse as more cases pop up daily. In the following article, we’ll see some examples of this and also what employers can do to try and avoid these situations.

Article Via: Law.com

As the world continues to deal with the health and economic catastrophe created by the COVID-19 pandemic, a potential tsunami of related litigation has begun a slow but steady build. Because the pandemic is unprecedented, predicting the legal fallout left in its cruel wake is difficult. However, what we can predict—and what we, as lawyers, must predict—is an eventual steady stream of litigation directly related to the havoc wreaked by COVID-19. It is therefore critical for businesses, and the attorneys advising them, to anticipate the types of litigation they may face in the immediate future. The ability to predict provides the ability to plan, and planning may be a business’s most potent weapon in weathering the storm of litigation born from the pandemic.

Indeed, the business community has already seen an initial wave of litigation coming out of the COVID-19 crisis, including cases involving: (1) a maker of hand sanitizer making false statements about the sanitizer’s effectiveness against COVID-19. David et al. v. Vi-Jon, Case No. 20-cv-00424 (S.D. Cal. filed March 5, 2020); (2) Uber and Lyft drivers seeking a declaration that they are employees and not independent contractors, making them eligible for sick pay. See Verhines v. Uber Technologies, Case No. 20-583684 (Cal. Super. Ct. filed March 12, 2020); Rogers v. Lyft, Case No. 20-583685 (Cal. Super. Ct. filed March 12, 2020); (3) retailers price gouging high-demand items such as toilet paper and hand sanitizer. See Armas v. Amazon.com, Case No. 104631782 (Fla. 11th Cir. Ct. filed March 10, 2020); (4) a New York fitness chain charging monthly fees after the gym closed because of the pandemic. See Namorato v. Town Sports Int’l, Case No. 20-cv-02580 (S.D.N.Y. filed March 26, 2020); and (5) ticket reseller StubHub refusing to refund money for cancelled events. See McMillian v. StubHub, Case No. 20-cv-00319 (W.D. Wis. filed April 2, 2020).

What is apparent from the COVID-19 litigation we have seen thus far, is that while most states are only a few weeks into mandatory shelter-in-place orders, there is already a panoply of pandemic-related litigation underway.

Employment-Related Lawsuits May Be a Lagging Indicator

Conspicuously underrepresented in this first wave of litigation are employment-related cases. The relative absence of employment cases is surprising given the rapid widespread shutdown of non-essential businesses to slow the spread of the pandemic. Indeed, the pandemic forced employers to terminate and furlough workers at an alarmingly fast pace. In just the first several weeks of the pandemic, nearly 17 million people have filed unemployment claims, representing nearly 1 out of 10 individuals who were previously employed.

As a counselor to employers who litigates employment-law issues, I interpret the relative absence of employment claims as the preverbal calm before the storm. Employers should take no comfort from current relatively calm waters. It is likely that employers will be dealing with significant employment lawsuits as the pandemic continues to unfold and ultimately resolves.

This article will review areas of employment law that I believe could be the subject of intense litigation due to the COVID-19 pandemic. After providing an overview of these areas of law, the article then provides some guidance to employers as they await the next phase of employment-related lawsuits.

Employee Safety Claims

Employers should pay particular attention to their obligations to protect employees from exposure to COVID-19. Workplace safety standards are governed by the Occupational Safety and Health Administration (OSHA). Under the OSHA’s General Duty Clause, employers are required to furnish “employment and a place of employment … free from recognized hazards … likely to cause death or serious physical harm.” See Occupational Safety and Health (OSH) Act of 1970, 29 USC 654(a)(1).

OSHA’s Personal Protective Equipment (PPE) standard requires that employers provide PPE “for eyes, face, [and] head” including “protective clothing, respiratory devices, and protective shields[.]” 29 CFR 1910.132(a). Employers are required to provide PPE “wherever it is necessary by reason of hazards of … environment … encountered in a manner capable of causing injury or impairment … through absorption, inhalation or physical contact.” Id. In addition, if employees provide their own PPE in such circumstances, the employer is responsible “to assure its adequacy, including proper maintenance, and sanitation of such equipment.” 29 CFR 1910.132(b).

Like the Equal Employment Opportunity Commission (EEOC), OSHA has provided initial COVID-19 guidelines. However, the legal landscape is developing rapidly, and employers are often required to figure out on their own how COVID-19 impacts their responsibility to protect the health and safety of employees.

Employee Discrimination Claims

Adverse employee actions (especially terminations) resulting from the pandemic, are likely to receive significant scrutiny. Employment discrimination can take many forms, including derogatory comments, slurs, stereotyping, unwarranted poor performance reviews, demotions, or wrongful terminations. Moreover, employees do not need “smoking gun” evidence to successfully bring a discrimination claim. See McDonnell Douglas v. Green, 411 U.S. 792, 802 (1973). Rather, the plaintiff need only show that the employment action occurred under circumstances giving rise to an inference of discrimination. McDonnell Douglas, 411 U.S. at 802. Once the plaintiff meets this initial burden, the onus is on the employer to articulate a non-discriminatory reason for the action. Id.

Inevitably, some employees will see pandemic-related terminations and other adverse actions as a smoke-screen hiding unlawful discrimination. For example, if the employer terminates some but not all of its employees, employees may challenge the decision to layoff certain groups of workers as discriminatory.

Wage and Hour Claims

The Fair Labor Standards Act (FLSA) is the primary federal law governing wage and hour laws. The FLSA outlines employer requirements regarding overtime pay, minimum wage, exempt vs. non-exempt employee classification and record keeping. 29 U.S.C. §§206(a) and 207(a); 29 CFR §516.2(a) and (c); 29 CFR §516.3.

State governments have been encouraging—if not outright demanding—that businesses allow employees to work from home where possible. However, employers are still required to follow FLSA guidelines when employees are telecommuting

Across nearly all economic sectors, employers have been reducing employee salaries in an effort to weather the pandemic-caused economic destruction. Employers who temporarily reduce exempt employee salaries, should ensure compliance with the FLSA. If an exempt employee’s salary is reduced below the FLSA salary test guideline, the employee may now be non-exempt triggering minimum wage requirements and overtime pay for any hours worked in excess of 40 in a work week. See id.

WARN Act Claims

The Worker Adjustment and Retraining Notification (WARN) Act is a federal statute that requires most employers with 100 or more employees to provide 60 day advance notice of plant closings or mass layoffs (as defined in the act). Some states have their own WARN Act equivalents.

Under the WARN Act, there are two key exceptions to the notice requirement that may apply to the COVID-19 pandemic: (1) the natural disaster exception; and (2) the unforeseeable business circumstances exception. 29 U.S.C. §§2102(b)(2) (A-B); 20 CFR §639.9(c).

Under the natural disaster exception, an employer is allowed to give less than full notice if the job losses directly result from a natural disaster. 20 CFR §639.9(c)(2). The unforeseen business circumstances exception is appropriate where “a sudden, dramatic, and unexpected action or condition outside the employer’s control” causes the closing or layoff. 20 CFR §639.9(b)(1).

Employers forced to lay off employees with little warning, face significant litigation risk if they are subject to the WARN Act. Absent future government COVID-19 exemptions from the WARN Act, the unforeseen business circumstances and natural disaster exceptions are likely an employer’s best defense.

Takeaways for Employers

Employers lucky enough to continue operating during the pandemic should be cognizant of employee safety. For example, employers should consider conducting a workplace hazard assessment. Employers may want to proactively providing PPE to employees who are at risk of COVID-19 exposure.

Employers should also clearly set out and document non-discriminatory reasons for adverse employment decisions (especially terminations), and make sure those reasons are applied objectively. Employers should consider ad hoc pandemic-specific discrimination training to make sure employees are able to identify and prevent pandemic-related discrimination.

Prior to instituting salary reductions, employers should consult with inside or outside counsel to ensure compliance with the FLSA. If exempt employee salaries fall below the federal and/or state minimum threshold, employers must be careful to pay employee overtime, if required. Employers should also remind human resources that they must comply with the FLSA’s minimum wage, overtime and record keeping requirements, even for workers that are telecommuting.

Finally, employers subject to the WARN Act or a state equivalent who must reduce payrolls should provide proper notice of reductions under the law. Employers who are unable to provide full notice of a pending layoff (60 days under the WARN Act), should provide as much notice as possible and document the reasons for the inability to provide notice in anticipation of defending against future WARN Act litigation.

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Lisa Smith is CEO of Andere Corporation and Chief Content Developer at HelpDeskSuites.com. Follow her on Twitter, connect with her on LinkedIn, listen to her Small Business Spoonfuls Podcast, and find more in her Compliance Warriors Facebook Group.

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