As they struggle to stay afloat during this time of crisis, many employers are looking for legal, humane ways to cut costs, including in payroll and benefits. This article summarizes the current state of Texas law on these subjects. The intersection between new and old laws on leave, reductions in force, health and safety obligations, disability, benefits, and coronavirus-specific mandates is dynamic. While this article generally describes various tools, options and obligations, Texas employers should consider consulting counsel for the latest updated guidance and with any specific questions.
Options for Trimming Payroll
Reduction in Force (RIF)
Typically a last resort, this option is unfortunately top of the list during the COVID-19 pandemic as a means to cut costs. Once positions are eliminated, labor and fringe benefits costs tail off quickly. If contemplating a RIF, employers in Texas should consider the following steps:
- base RIF-selection decisions on legitimate, non-discriminatory and non-retaliatory reasons;
- strive to check for disparate impact on employees in protected EEO and other categories;
- if required, provide advance notice (to employees, union, Texas Workforce Commission (TWC));
- pay final check within 6 calendar days of separation;
- pay any accrued leave if promised by policy or agreement; and
- provide notice of healthcare continuation options.
Employers may submit a Mass Claim to TWC to streamline the processing of Texas unemployment claims.
Furloughs maintain employment relationships but use a temporary leave of absence to save costs. Employers should consider the following key steps:
- determine whether the furlough's duration and/or scope triggers advanced written notice;
- analyze any collective bargaining agreement for furlough provisions;
- plan to enforce a no-work policy while employees are furloughed: no checking emails or voicemails, no telephone calls, no work at all;
- plan to continue to pay benefits during furlough; and
- rely on objective, nondiscriminatory and non-retaliatory criteria for selecting furloughed employees.
Employers can establish a shared work program to supplement wages lost for up to 39 weeks.
Reduction in Pay
Texas employers can prospectively reduce pay for at-will, non-unionized employees even with unchanged hours, as long as the change is not used to evade the salary basis requirements. Employers must continue to satisfy Fair Labor Standards Act obligations, including minimum wage requirements for non-exempt workers and, for exempt employees, the salary threshold ($684/week) as applicable. If prospectively reducing pay, employers should provide employees advanced notice of the reduction and refrain from commenting on work hours. If salaries are reduced, employers should not comment on work hours. Notice is advisable; no special format is required. Unionized workforces with a CBA are an exception.
Reduction in Hours
Absent a CBA or individual employment agreement to the contrary, employers may modify hours or schedules so long as the change does not drop employees below minimum wage. Exempt employees must be paid the full predetermined salary amount "free and clear" for any week in which they perform any work. There is no requirement, however, that the predetermined salary be paid if the employee performs no work for an entire workweek.
Promotion Delay, Hiring Freeze, Delay Start of New Hires
Absent a CBA or employment agreement to the contrary, these options are available to Texas employers without any prior notice requirement or similar restriction.
Simultaneous Use of Multiple Cost Cutting Tools
There is no state or federal prohibition on simultaneously implementing multiple cost-cutting measures.
Reducing Hours or Pay for Employees with H-1B Visas
Employers generally must file amended H-1B petitions if making material changes in work terms and conditions.
Offering Early Retirement
Employers can reduce costs by offering employees the option to retire early. With early retirement programs, labor costs tail off quickly and perhaps fewer employees may need to be laid off. In contemplating an early retirement program, employers should try to account for several criteria:
- eligibility for the program should be based on objective criteria (e.g., years of service), rather than age;
- the program should be truly voluntary; and
- severance or separation agreements should comply with the Older Workers Benefit Protection Act.
Benchmarking or Collaboration Activity
Certain information sharing and collaboration among competitors can be lawful if justified by legitimate business concerns—like improving workplace safety and producing COVID-19 related PPE. Polling efforts and agreements between businesses to restrain competition through increased prices or lower wages remain unlawful, even in the midst of a pandemic. Consequently, before soliciting or sharing activities and/or information on what competitors are doing with competitive information like wage reduction and benefit programs, paid leaves of absence, furloughs and the like, employers should review the DOJ's Antitrust Guidance, Competition in Labor Markets Guidance, and Antitrust Red Flags for Employment Practices and consult qualified antitrust counsel.
Managing Leave and Pay
FMLA-Leave for Eligible Employee Diagnosed with COVID-19
Eligible employees may take federal Family and Medical Leave Act (FMLA) leave if: (1) COVID-19 has developed into a serious health condition for the employee, causing inability to work; or (2) COVID-19 has developed into a serious health condition for a parent, spouse or child the employee takes care of. For employers with 500 or more employees, this leave will not necessarily increase labor costs, because traditional FMLA leave is unpaid. But the new Emergency Paid Sick Leave Act (EPSLA) allows eligible employees at organizations with fewer than 500 employees to take up to 80 hours of paid leave without using PTO, starting April 1, 2020, if the employee:
- is subject to a quarantine or isolation order related to COVID-19;
- has been advised by a health care provider to self-isolate due to COVID-19;
- is experiencing COVID-19 symptoms and seeking a medical diagnosis;
- cares for someone, not necessarily a relative, subject to a quarantine or isolation order;
- cares for someone, not necessarily a relative, who has been advised to self-isolate;
- cares for a child under 18 years of age or a child who has mental or physical disability and is incapable of self-care due to that disability, and the child's school or childcare provider closes or becomes unavailable; or
- is experiencing any substantially similar condition specified by the Health and Human Services.
Rate of Pay under EPSLA
If an employee takes leave under the EPSLA for reasons 1-3 (above), the employee is paid leave at 100% of their regular rate of pay, up to $511/day (or $5,110 in the aggregate over a 2-week period). If the employee takes leave for reasons 4-7 (above), they receive paid leave at 66% of their regular pay rate, up to $200/day (or $2,000 in the aggregate over a 2-week period). Employers with 500 or more employees are not subject to the EPSLA or the emergency, expanded family and medical leave provisions (Emergency FMLA+) of the Families First Coronavirus Response Act (FFCRA). Therefore, these employers are not required to provide paid sick leave for COVID-19-related absences.
When 500-Employee Threshold Is Determined under EPSLA or Emergency FMLA+
U.S. Department of Labor guidance states the 500-employees threshold is counted at the time the leave is to be taken.
Covered employers must post this notice of FFCRA requirements in a conspicuous place on their premises as of April 1, 2020. Premises includes electronic spaces where employees receive information. Thus, the requirement is satisfied by emailing this notice, or posting it on employee information websites.
Employee Absence to Care for Schoolchildren
Under the Emergency FMLA+, employees who have worked at least 30 days for a company with fewer than 500 employees get 12 weeks of job-protected leave if they must miss work to care for their minor child or an adult child who is incapable of self-care due to a mental or physical disability. The first 10 days may be unpaid. After that, paid leave is due at 66% of the regular rate. School closures will increase these requests. The child must be a legal ward or financially supported by the employee, or the employee's biological, adopted, foster or step child. Healthcare providers and emergency responders are exempted. Employees may use any accrued paid leave to cover the 10-day unpaid period. Employers with 25-499 employees must restore the employee to the same or equivalent position when leave expires. Employers with fewer than 25 employees are not automatically exempted from the job-restoration requirements but may be exempted if the employee's position no longer exists due to an economic downtown or other COVID-19 circumstances. Employers may require eligible employees to provide documentation. Employers should consult the certification rules for conventional FMLA-leave requests for more information.
Does Emergency FMLA+ Add Time to FMLA Entitlements?
Emergency FMLA+ expands qualifying reasons for leave. It does not provide an additional 12 workweeks of leave.
Leave as ADA/COVID-19 Accommodation
For exposed employees who experience no symptoms, or only mild, temporary symptoms, COVID-19 standing alone likely would not qualify as a "disability" under the ADA. Employers, however, must individually assess "disability" under the ADA, taking into account an individual's particular reaction and symptoms.
Exemption from EPSLA & Emergency FMLA+
Employers with less than 50 employees are exempt from the requirement to provide paid sick leave or expanded family and medical leave if the leave payments would jeopardize the viability of their business. The exemption applies when:
- providing the leave would result in the business's expenses and financial obligations exceeding available business revenues and cause the business to stop operating at minimal capacity;
- the absence of the employee(s) requesting leave would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or
- there are not enough workers available at the time and place needed to perform the labor or services provided by the employee(s) requesting leave and those services are needed for the business to operate at minimal capacity.
To attempt to claim this exemption, employers should make and keep documentation about the decision-making process.
Emergency Paid Sick Leave for Furloughed, RIF'd or Laid Off Employees
Employees who have been laid off, subjected to a RIF, or furloughed are ineligible for paid sick leave under EPSLA but may be eligible for unemployment compensation.
Does Paid Sick Leave Provided Before April 1, 2020 Count Toward the Two-Week Requirement?
Paid sick leave provided to employees before April 1, 2020, even if for COVID-19 reasons, does not count toward the EPSLA or Emergency FMLA+ two-week requirements.
Pay Required for Employee Sent Home With a Fever or Other Recognized Symptoms
If the employee performed any work before being sent home due to recognized symptoms of COVID-19, pay is required. If not, no pay should be required unless a CBA, agreement, or policy so provides.
Unemployment Compensation and Texas's Shared Work Program
Shared Work Program
Texas's Shared Work Program allows employers with approved plans to supplement wages lost due to reduced work hours with partial unemployment benefits. Employers currently providing fringe benefits must continue to provide them to enrolled employees participating in approved plans.
Approval and Modification of Shared Work Plan After Approval
Approval of a shared work plan takes up to 30 days after submission. Additionally, Texas employers may modify approved shared work plans to meet changed business conditions if the modification conforms to the basic provisions of the approved plan and the TWC is notified before the change. Substantial changes will be re-evaluated for approval.
Health & Safety
Employees Test Positive for COVID-19 or Is Symptomatic after Exposure to COVID-19
If an employee tests positive, employers should:
- promptly send home the ill employees and others exposed to them;
- clean their workplace consistent with CDC recommendations;
- protect the ill employees' privacy when notifying key stakeholders;
- ban the ill employees from the workplace until their return is permitted by local order or CDC guidance; and
- require employees to stay home if symptomatic or in close contact with someone who has tested positive for or been exposed to virus.
Requirement to Notify Authorities that Employee Tested Positive for COVID-19
Employers must timely report to the Occupational Safety and Health Administration (OSHA) an employee's confirmed case of COVID-19 but only if an employee dies or requires in-patient hospitalization as a result of contracting the virus while performing work-related duties. Currently, there is no requirement to report confirmed cases to any public health authorities.
Certification Required before Sick or Exposed Employee Returns to Work
Local stay-at-home orders may require employees to obtain clearance from a public health authority or their medical provider before returning to work. Where not required by law, employers should establish a policy, based on current public health guidelines, that outlines the circumstances under which an employee may return to work following a confirmed or suspected case of COVID-19. If a policy requires certification, that certification should seek only information that is job-related and consistent with business necessity.
Asking Employees if They Have COVID-19
Employers should focus their inquiries on recognized symptoms and encourage employees to self-disclose whether they have contracted the virus. Recognized symptoms of COVID-19 include dry cough, shortness of breath, fever, loss of smell or taste as well as gastrointestinal problems, such as nausea, diarrhea, and vomiting.
Reducing Employees' Exposure Risk
Employers must provide a safe workplace for employees. To do so during the pandemic, employers should consider the following protocols:
- monitor international, federal, state and local public health communications about COVID-19;
- provide employees access to information about the virus and what to do if exposed;
- minimize in-person contact and encourage social distancing when in-person contact is inevitable;
- frequently clean and disinfect high-touch areas;
- minimize overcrowding in common areas like cafes, breakrooms, elevators, etc.;
- limit non-employee access to worksites;
- communicate the availability of employee health and benefit resources;
- provide facilities to regularly clean hands with warm water and soap or alcohol sanitizer; and
- review OSHA's Guidance on Preparing Workplaces for COVID-19, risk-reduction steps and latest enforcement response plan.
Though not normally allowed, temperature checks are permissible during this pandemic if combined with other risk-mitigation measures, performed by someone medically trained and equipped with appropriate PPE, and privately performed in a way that does not further expose employees or screener to COVID-19.
Additionally, any documented results of employees' temperature check(s) must be kept confidential and separate from their personnel file. If an employee refuses a temperature screening, the employee may be sent home but employers should consult with counsel before terminating or disciplining the refusing employee.
Employee Has Fever
Employers should try not to overreact if temperature screening reveals an employee has a fever. Instead, send home the employee or refer them to one of the local testing centers for additional screening. If the employer's health insurer is waiving consumer costs for medically-necessary COVID-19 testing, inform the employee of this benefit.
Disciplining Employee for Not Following Hygiene Protocols
If a proper workplace policy permits, employees may be disciplined for not following hygiene protocols like regular handwashing or hand-sanitizer use, proper PPE use, or social distancing.
Disciplining Employees Refusing to Work Due to COVID-19 Fears
Employers should proceed cautiously and consult with counsel if they are considering disciplining or terminating employees for refusing to work due to fears of contracting COVID-19. Such refusals may be protected activity under various laws.
Face Masks and Coverings Requirement
Absent an employer policy or a local mandate, like the one in Austin, non-healthcare employees who are not telecommuting are not required to wear face masks, respirators or other coverings to prevent the spread of COVID-19.
Though not universally required, employers may develop policies mandating the use of masks in the workplace. Any such policy should be consistent with the CDC's guidance and accompany training on the proper use, cleaning and disposal or maintenance of masks.
Obligation to Pay for Masks
Employers that neither operate under an order mandating the use of face mask, nor implement a policy requiring the use of masks in the workplace, are not obligated to pay for costs associated with providing, cleaning or maintenance of masks or face coverings. But employers that operate under an order mandating mask use may be required by the order itself to cover costs associated with the mask. Even if not, employers with policies mandating mask use should consider bearing the costs of providing the masks (and cleaning, if reusable) for several reasons. Employers mandating mask use should confer with counsel for further details.
Recordkeeping Obligations for Confirmed COVID-19 Cases
OSHA generally requires most employers to record, on OSHA Form 300, a confirmed COVID-19 case, as defined by the CDC, if it is work-related and involved death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness, a significant injury or illness. Until further notice, however, most employers outside the healthcare, correctional and emergency response industries are relieved from making work-relatedness determination unless there is objective evidence that a COVID-19 case may be work-related and that evidence was readily available to the employer.
Workers' Compensation Issues
Nonsubscriber Liability for Employee Who Tested Positive at Work
Texas employers that opt-out of the state's workers' compensation scheme, or "nonsubscribers," that heed public health warnings, comply with restrictions found in executive or stay-at- home orders, and implement measures to reduce the risk of exposure are unlikely to be liable to employees who contract COVID-19 at work. As a matter of common sense, however, liability exposure may appear greater when an employee is injured while working for a nonsubscriber that remained open in violation of a stay-at-home order.
Workers' Compensation Liability for Employee Who Tested Positive
For most workers, merely contracting the virus at work is not enough to trigger an employer's workers' compensation liability. Under Texas law, employees must be at a greater risk by virtue of their job before an employer will be responsible for a workers' compensation claim.
Injured, Teleworking Employee Covered by Workers' Compensation or Nonsubscriber?
Employee injuries that occur within the course and scope of employment are generally compensable regardless of where they occur. To promote safety, employers with teleworking employees should develop telework policies that set fixed work and break hours, outline expectations for working from home, require employees to designate an area of their home as their worksite, and require employees to timely report at-home injuries.
Discrimination and Equal Employment Opportunity
Accommodating Employees Working from Home
If an employee with a disability requests a device, software or other modification to their new work-from-home environment, employers should engage the employee in the interactive process and individually assess whether providing a reasonable accommodation is possible without undue hardship.
Postponing Start Date of New Hires Who Fall into High-Risk Group
Pregnant women, older adults and individuals with serious underlying disease may be at higher risk for severe illness from COVID-19. Employers should not postpone the start date for new hires solely because the new hire is at an increased risk of developing serious illness if contracting the virus. Employers with concerns about how to treat high-risk employees and new hires should consult with counsel for tailored advice.
Reimbursement for Home Office Expenses
Texas law does not mandate reimbursement of expenses employees incur as a result of telework. The Fair Labor Standards Act, however, requires employers reimburse employees for business expenses incurred that would bring their pay below $7.25/hour for hourly employees and $684/week for salaried employees.
Docking Pay for Equipment Damaged While Working From Home
Wage deductions for damaged company property are permissible in Texas if the deduction amount does not drop an employee's pay below minimum wage and the employee previously authorized, in writing, the deduction.
Employers in Texas should stay tuned for further developments as the COVID-19 pandemic unfolds.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.