The U.S. Department of Labor (“DOL”) has renewed its invitation to employers and employees to engage in a “national online dialogue” in connection with the Families First Coronavirus Response Act (FFCRA), which took effect on April 1.  The DOL is soliciting comments and questions with respect to its questions and answers, posters, and fact sheets that it has published in connection with the FFCRA.

The DOL has also extended the deadline from March 29 to April 10 for employers and employees to provide input online at https://ffcra.ideascale.com.

Employers may want to speak with their counsel about comments, questions, ideas, or concerns to present to the DOL.

In addition to its recent, exigent responsibility of preparing guidance on the protections and relief offered by the Families First Coronavirus Response Act, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) has issued three new opinion letters addressing the excludability of certain types of payments from the regular rate of pay under the Fair Labor Standards Act (“FLSA”).  While these opinion letters do not tread new ground, they are useful reminders of important regular rate principles and merit careful review.

As background, under the FLSA, an employer must pay a non-exempt worker at least one and a half times the employee’s “regular rate” for all hours worked in excess of forty hours in a workweek.  29 U.S.C. § 207(a)(1).  The regular rate includes nearly “all remuneration for employment paid to, or on behalf of, the employee,” with few exceptions.  Section 7(e) of the FLSA provides eight distinct types of payments that the law excludes from the regular rate, such as fully discretionary bonuses and certain payments for non-working time, among others.  29 U.S.C. § 207(e).

Longevity Awards

In FLSA2020-3, the WHD analyzed whether the regular rate includes length-of-service payments required by a municipal resolution.  As described in the employer’s letter requesting the opinion, eligible employees “shall” (i.e., must) receive longevity awards in the amount of $2 per month for each whole year of the employee’s tenure.  While the municipality currently pays such awards every two weeks, the employer contemplates paying such awards in a one-time lump sum each year around Christmas time.

The FLSA expressly excludes from the regular rate “payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency[.]”  29 U.S.C. § 207(e)(1).  Under the implementing regulations, if a “bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under Section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it[.]”  29 C.F.R. § 778.212(c).  However, bonuses that are so substantial “that it can be assumed that employees consider it part of the wages for which they worked” and those that are required by law are not considered gifts for purpose of exclusion from the regular rate.”  29 C.F.R. § 778.212(b).

Because a municipal resolution mandates the longevity payments at issue in the opinion letter (even if their form and timing is subject to discretion), the WHD concluded that they are not excludable payments in the nature of gifts and therefore become part of the regular rate.  As a final note, the WHD advised that if the municipal resolution had merely authorized but not required longevity payments at Christmas, they could be excludable from the regular rate under Section 7(e)(1), even if made year after year.

Referral Bonuses

In FLSA2020-4, the WHD analyzed whether certain referral bonuses fall within the regular rate.  The referral bonus proposed in the employer’s letter would be payable in two equal installments—the first, upon the employer’s hiring of the referred employee, and the second, upon the one-year employment anniversary of the referred employee, provided that the referring employee remains actively employed.  The bonus would be available only to employees who do not work in Human Resources and have no job responsibilities associated with employee recruitment, selection, or hiring.  Participation in the program would be voluntary, would not require any significant time, and would be limited to social conversations the employee has outside of work hours.

Generally, sums paid to an employee for recruiting another to join his or her employer’s workforce need not be included in the regular rate if three conditions are met:  (1) participation in recruitment activities is strictly voluntary; (2) the employee’s efforts in connection with recruitment activities do not involve significant amounts of time; and (3) recruitment activities are limited to after-hours solicitation among friends, relatives, neighbors, and acquaintances as part of the employee’s social affairs.  See 84 FR 68,755-56; 29 C.F.R. § 778.211(d).  The proposed referral program met all three conditions, and therefore, the WHD concluded that the first installment of the referral bonus is excludable from the regular rate.

The WHD reached a different conclusion regarding the second installment.  Because payment of the second installment would be contingent on the referring employee (in addition to the referred employee) remaining employed for one year after the hiring of the referred employee, it was more akin to a longevity bonus—like that discussed in FLSA2020-3—rewarding the referring employee for an additional year of service.  If the second installment was not contingent on the referring employee’s continued employment, or required a shorter amount of time of continued employment, then it likely would not be like a longevity bonus, and instead, could fall outside the regular rate.

The WHD further noted that even as a longevity bonus, the second installment still could be excludable from the regular rate as a “payment[] in the nature of gifts … as a reward for service” under Section 7(e)(1), provided it was not (1) measured by hours worked, production, or efficiency; or (2) paid pursuant to a contract.  29 C.F.R. § 778.212(b).  If either of these factors is present, the longevity bonus becomes part of the regular rate.  Based on the facts provided by the employer, the first condition for exclusion as a gift would be met but it was unclear whether there was an enforceable contractual right to the payment of the second installment.  The WHD opined, therefore, that if payment of the second installment would be contractually enforceable, then it is part of the regular rate.

An Employer’s Contributions to a Group-Term Life Insurance Policy

In FLSA2020-5, the WHD analyzed whether the regular rate must include the portion of an employer contribution to group term life insurance coverage exceeding $50,000 that the Internal Revenue Code (“IRC”) treats as imputed income taxable to the employee.  The WHD first cited the principle that “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide [benefit] plan,” such as a life insurance plan, fall within a regular rate exclusion.  29 U.S.C. § 207(e)(4).  The WHD ultimately advised that whether income is taxable under the IRC does not dictate excludability from the regular rate.  Put another way, “[t]here is no presumption that income taxable under the IRC must be included in the regular rate.”  The relevant inquiry is instead whether an employer’s contributions to a benefit plan satisfy the statutory and regulatory requirements under the FLSA.

The opinion letter mentions that in order to be excludable from the regular rate, insurance policy “benefits must be specified or definitely determinable on an actuarial basis” or there must be “a definite formula” for determining both the employer’s contributions and the benefits to the employees.  See 29 C.F.R. § 778.215(a)(3).

The new opinion letters make clear that, even amid the exigent circumstances and legislative developments related to the current pandemic, the WHD remains committed to its responsibility of issuing interpretive guidance regarding the FLSA.  Employers should watch for further guidance that may be forthcoming.

It is no secret that independent contractor misclassification claims are being filed against employers with a great deal of frequency, often as class actions and often in California.  Many of those lawsuits have been filed against gig economy companies.  But, of course, they are not the only companies facing such claims.

As a result, many companies that classify workers as independent contractors are asking a basic question, “Are those workers properly classified?”

It sounds like such a simple question, one that should have a simple answer.

But there is no simple answer, at least not in California, where the California Supreme Court created a new “ABC” test in Dynamex, only to have the legislature follow up with a statute known as AB 5, codifying and expanding Dynamex while simultaneously excluding some occupations from its scope.

Let’s see if we can help navigate the current state of the law in California.

What is the test for independent contractor status in California?

For claims post-January 1, 2020, it’s AB 5, which we previously discussed here.

For claims pre-January 1, 2020, it could be AB 5.

Or maybe AB 5 and Dynamex.

Or maybe AB 5 and Dynamex and Borello.

Or maybe just Dynamex.

Or maybe just Borello.

It depends on what time period, claims and occupations are at issue, and whether AB 5 and Dynamex are determined to be retroactive.

Does AB 5 apply retroactively?

Maybe, maybe not.  AB 5 specifically states that some sections apply retroactively.

And to the extent AB 5 is intended to be a “clarification” of existing law, it may apply retroactively because clarifications generally apply retroactively.

But that does not mean that there are not arguments that AB 5 does not apply retroactively.  “[U]nless there is an ‘express retroactivity provision, a statute will not be applied retroactively unless it is very clear from extrinsic sources that the Legislature must have intended a retroactive application.’”  And the subdivision of AB 5 that codifies Dynamex’s “ABC” test has no express retroactivity language, while a subsequent subdivision concerning the exceptions to the “ABC” test does have such language.  That distinction is meaningful because if the “legislature carefully employs a term in one statute and deletes it from another, it must be presumed to have acted deliberately.”

What is the difference between AB 5 and Dynamex?

AB 5 has a number of exceptions that were not in Dynamex, and Dynamex’s ABC test was limited to claims arising under a California wage order.

And AB 5 extends beyond just claims relating to wage orders.  For example, AB 5 extends to claims for wrongful termination or expense reimbursement, where Dynamex did not.

What occupations are excepted from AB 5?

A number of occupations are excepted from AB 5, subject to certain conditions (including licensure or certification), including physicians and surgeons, dentists, podiatrists, psychologists, veterinarians, lawyers, architects, engineers, private investigators, accountants, securities broker-dealers, investment advisers, and commercial fisherman.

And more exceptions may be on the way.

Does Dynamex still apply to occupations that are excepted from AB 5?

Maybe, maybe not.

For claims arising on or after January 1, 2020, Dynamex should not apply.

For the specific occupations that are excepted from the ABC test, AB 5 makes clear what the test is, and that is generally the one set forth in Borello, not Dynamex.

Assuming AB 5 is not retroactive, for claims relating to wage orders arising before January 1, 2020 but after Dynamex was issued on April 30, 2018, then Dynamex would apply for those claims – and Borello would be the test for all non-wage order claims arising before January 1, 2020.

Is Dynamex retroactive?

Maybe, maybe not.  That issue is before the California Supreme Court.

There is a good argument that Dynamex should not be retroactive because, before Dynamex, the “ABC” test had never been adopted in California courts.  For 70 years, the worker classification test focused on the right of control, which came to be known as the Borello test.  Before Dynamex, there was not a single California authority that had adopted the “ABC “test, which was taken from New Jersey and Massachusetts law.  Because the Borello test had been the law of California since 1946, California businesses reasonably relied on that standard, and decisions (like Dynamex) should apply only prospectively where the California Court of Appeal has previously consistently applied “a settled rule” different from the new one.

Is the Borello test dead?

Not at all.  It is the test generally used for the exceptions identified in AB 5.

And if AB 5 is not retroactive, then Borello would still apply to claims unrelated to wage orders, such as expense reimbursement.

Additionally, it arguably applies to the “joint employer” inquiry even if AB 5 is not retroactive.

Do AB 5 and Dynamex apply to the “joint employer” inquiry?

So far, there are two courts that have concluded AB 5 and Dynamex do not apply where one of the entities is an undisputed employer, and that they only apply to the relationship between a worker and the “hiring entity.”

But what if there is no undisputed employer and an individual performs services for two unrelated companies?

The “ABC” test in Dynamex and AB 5 arguably should not apply to any entity that does not “hire” the individual.

By way of example, assume an individual enters into a contract with Company X and performs services for Company X’s clients Companies Y and Z.  And assume that none of these companies are affiliates (i.e., they do not have common ownership).  While the plaintiffs’ bar may argue that the “ABC “test should apply to all three companies, Dynamex explained that workers are presumptively employees of “the hiring business” unless that business meets the ABC test.  And AB 5 expressly refers to “the hiring entity” in codifying the ABC test.  Because Companies Y and Z did not “hire” the individual, the ABC test should not apply to them.

Be careful what you ask for.

We have used that expression frequently when writing about recent federal court orders requiring DoorDash and Postmates to conduct thousands of individual arbitrations in California pursuant to the terms of their arbitration agreements with their drivers.

Thousands of individual arbitrations for which DoorDash and Postmates would have to pay many millions of dollars in arbitration fees alone.

The risk of dozens, hundreds or even thousands of individual arbitrations attends any time an employer seeks the benefits of an arbitration agreement with a class and collective action waiver.  It is the reason why many employers have chosen to forgo arbitration agreements with class and collective action waivers – and the reason why many have settled cases on a classwide basis even when they have such agreements in place.

Now, one of the companies ordered to conduct thousands of individual arbitrations in California has taken an aggressive strategic step – one that seems likely to put it right back in front of the judge who ordered it to conduct thousands of individual arbitrations in the first place.

Unhappy with the order by a federal judge in Oakland requiring it to conduct more than 5,000 individual arbitrations, Postmates has now filed a separate federal lawsuit in Los Angeles against more than 10,000 of its drivers, seeking an injunction to prevent individual arbitrations from going forward.  In the new lawsuit, Postmates argues that thousands of individual arbitrations is a “de facto class action.”  And it accuses the employees’ attorneys of “abusive litigation tactics” by filing thousands of individual arbitration demands.

It does not appear that the 10,000 arbitrations Postmates seeks to enjoin include the 5,000 individual arbitrations it was already ordered to conduct by a federal judge in Oakland – but there seems to be little question that the injunction Postmates seeks would be useful in trying to enjoin those arbitrations from proceeding, too.

But, of course, that is only if Postmates succeeds in obtaining such an injunction.

It is not difficult to imagine the first sentence of whatever the drivers might file in response to Postmates’request: “Postmates is arguing on the one hand that drivers cannot bring their claims together, and argues on the other hand that the drivers cannot bring their claims individually.”

It will be fascinating to see how Postmates responds to that.

Just as fascinating will be seeing which court ultimately addresses Postmates’ new complaint and its request to enjoin individual arbitrations.

By filing the suit in Los Angeles, Postmates likely believes that it will find a more favorable audience for its arguments in Los Angeles than in Oakland.

It may never find out.

Without delving into all of the procedural nuances, Postmates’ new lawsuit in Los Angeles seems likely to be considered to be related to the case in Oakland.  That suggests that the new lawsuit may well be transferred to Oakland, where it would be assigned to the very same judge whose order Postmates is trying to undo through the new complaint.

The very judge who accused Postmates of hypocrisy for trying to escape its own arbitration agreements.

The very judge who had this to say about Postmates in ordering it to conduct more than 5,000 individual arbitrations: “Postmates’ obligation to tender $10 million in filing fees as a result of those arbitration demands is a direct result of [its own] agreement — which Postmates drafted and which Postmates required each courier to sign as a condition of working for Postmates. It strains credulity for Postmates to argue that the amount of filing fees due constitute irreparable harm when that ‘harm’ is entirely of its own making.”

Think that judge might be displeased that Postmates was trying to get another judge to essentially undo her order?

No need to answer that question.  It was rhetorical.

As previously discussed, Colorado officially adopted the Colorado Overtime and Minimum Pay Standards Order # 36 (“COMPS Order”) on January 22, 2020, which went into effect on March 16, 2020.  However, the Division of Labor Standards and Statistics in the Colorado Department of Labor and Employment (“the Division”) has recently implemented temporary emergency modifications to the COMPS Order.  The temporary changes will remain in effect through July 14, 2020 (the “temporary period”), although the State intends to go through a formal notice and comment period to make these temporary changes permanent.

Joint Employment

Under the revised temporary COMPS Order, the Division has clarified the “joint employment” standard under the Colorado wage and hour law.  Joint employment, under Colorado wage and hour law, will continue to be analyzed under the versions of the federal Fair Labor Standards Act (“FLSA”) and applicable FLSA regulations that were in effect as of the enactment of H.B. 19-1267 by Colorado on May 16, 2019.  This modification reflects a rejection of the revised federal joint employment regulation issued in January 2020

Earnings Statements

The COMPS Order required employers to provide employees with earnings statements each pay period including: (a) an employee’s name, address, occupation, and date of hire; (b) date of birth (if the employee is under 18); (c) daily record of all hours worked; (d) record of credits claimed and of tips; and (e) regular rates of pay, gross wages earned, withholdings made, and net amounts paid each pay period.  However, during the temporary period, employers need to provide only the information set forth in (d) and (e), along with the total hours worked in the pay period, and the employee’s and employer’s names.

While this additional information does not need to be on an earnings statement during the temporary period, employers must still retain records reflecting the information contained in an employee’s itemized earnings statement and provide employees access to information regarding the name, address, occupation, and date of hire of the employee, along with the daily record of all hours worked.  Employers can provide access to these records via any of the following methods:

  • provide the information with the regular earnings statements;
  • provide each employee with access to a functioning electronic portal that shows the information (but this method is permissible only if the employer knows an email address of the employee); or
  • provide each employee with the information for the entire calendar year by January 31st of the following year and, in addition, provide the information to an employee upon a request that an employee may make once per year.

Medicaid-Funded Workers

The revised COMPS Order also modifies provisions relating to Medicaid-funded workers.  In-residence workers’ daily overtime does not apply in the COMPS Order to companions designated as direct support professionals or direct care workers who: (1) are scheduled for, and work, shifts of at least 24 hours providing residential or respite services; (2) are employed by service providers and agencies that receive at least 75% of their total revenue from Medicaid or other governmental sources; and (3) provide services within Medicaid home and community-based service waivers.  Further, rest periods need not be 10 minutes every four hours for any employees who are providing Medicaid-funded services for a service provider or agency receiving at least 75% of its annual total gross revenue from Medicaid (or other governmental funds for providing such service within Medicaid home and community-based services, waivers (COMPS Order, Rule 5.2.1 (B)) and the services provided require continuous supervision of the service recipient, or providing rest period would interfere with ensuring the service recipient’s health, safety, and welfare.

Additionally, when direct support professionals or direct care workers servicing individuals with disabilities spend time in community outings with individuals with disabilities, as part of day programs, supported living services, or one-to-one respite or personal care, the time in such outings does not require employers to provide rest breaks or pay for rest breaks.  Employees within this category must receive rest periods that average, over the workday, at least 10 minutes per four hours worked and at least five minutes of rest in every four hours worked.

Required Posting

The Division has also released the COMPS Order poster, which employers must display where workers may easily read it during the workday.  If workplace conditions make physical posting impracticable, employers must provide a copy of the poster to each worker within the first month of hire and make the poster available to employees upon request.  If an employer provides its employees with a handbook, manual, or written or posted policies, the employer must include a copy of the COMPS Order, or the COMPS Order poster, with these materials, and obtain a signature of acknowledgement from the employee.

During the temporary period, employers in Colorado should review the modified earnings statements requirements.  Employers should begin to implement the other provisions of the COMPS Order, including notice, posting, and daily overtime and breaks.

Given the number of states that have already ordered the closure of non-essential businesses due to the COVID-19 pandemic, employers fortunate to remain operational are likely dealing with the myriad challenges of a remote workforce.

As we previously wrote here, employers with work-from-home (“WFH”) policies in place need to make sure they are appropriately compensating their workers and are otherwise complying with all applicable federal, state, and local wage and hour laws.

In the WFH context, the related wage and hour concepts of “waiting time” and “on-call time” can be particularly thorny. At a high level, these terms refer to periods of time when non-exempt employees are not engaged in active productive labor, but are scheduled and available to work, or expected to work upon demand. Under the Fair Labor Standards Act (“FLSA”),  if an employee’s on-call or waiting time at home are “hours worked,” then the employee must receive compensation for such time.

Waiting Time

With many businesses operating at reduced capacity and/or focused on providing core services, a large number of non-exempt employees working from home may not have eight hours’ worth of work to do during their regularly scheduled hours and may find themselves idle for significant amounts of time as they await direction from management.  Are employers required to pay employees for all time when employees are at home waiting for work?  Not necessarily.

Under the FLSA, the threshold inquiry  is fact driven —  is an employee is “engaged to wait,” which is compensable, or “waiting to be engaged” to work, which is non-compensable?  See 29 C.F.R. §§ 785.14–16.

Under the implementing regulations, an employee is “engaged to wait” and considered on-duty when “waiting is an integral part of the job,” which may often be during “unpredictable” periods or periods “usually of short duration” in which the employee’s time “belongs to and is controlled by the employer.”  29 C.F.R. § 785.15.  “Waiting is an integral part of the job” when, e.g., a truck driver waits for others to load or unload goods from his truck or a bus driver guards the bus before making a scheduled return trip.  On the other hand, when an employee is “completely relieved from duty” and can “use the [inactive] time effectively for his own purposes,” he is “waiting to be engaged” (unpaid time). 29 C.F.R. § 785.16(a).

When employees are working from home as opposed to at an office, one might assume that they are completely relieved of duty during down periods and can use inactive time for their own purposes – e.g., watching television, playing video games, reading a book, doing yoga, basket-weaving, or any other personal pursuits.  However, that is not necessarily the case.

For example, where a supervisor informs a non-exempt employee that they will receive a draft document to review in the next 15 to 45 minutes and must immediately edit that document, the facts would tend to suggest that the employee is engaged to wait during this time (which is work time).

Further, short breaks of less than 20 minutes is compensable time pursuant to federal regulations (as well as many state wage and hour laws).  Similarly, if a manager has a standing policy that his direct reports must read and respond to all emails within five-to-ten minutes, at most, and the manager sends emails at regular intervals, then reports could be considering working when they pursue personal pursuits while waiting for an assignment.  See, e.g., U.S. Department of Labor Fact Sheet #22 (July 2008), available at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs22.pdf; see also Yu G. Ke v. Saigon Grill, Inc., 595 F.Supp. 2d 240, 255-56 (S.D.N.Y. 2008).

By contrast, if an employer sends employees work infrequently and does not require an immediate response, such employees are likely waiting to be engaged during their inactive time – i.e., not working.  Non-exempt employees hired shortly before the COVID-19 crisis, who have yet to fully ramp-up, may fall in this category.  In the same vein, non-exempt employees who have flexibility in deciding when to complete their daily and/or weekly tasks and can use the time in between such tasks as they want, with little to no interruptions, are likely “waiting to be engaged” in between tasks, i.e. non-compensable time.

On-Call Time

Non-exempt employees who are on-call – meaning that they  must be ready to work during a particular period — such as nurses, doctors, and appliance repair technicians, may need to be compensated for that on-call time.

As with “waiting time,” the particular factual context of each case will be determinative of whether on-call time is compensable.  Employers who require employees who are on-call to remain on their premises or so close to their premises that the employee cannot use the time effectively for his or her own purposes are considered working while on-call.  See 29 CFR § 285.17.  In fact, employees who are on-call at home may also be entitled to compensation.

Pursuant to federal regulations, “[t]ime spent home on call may or may not be compensable depending on whether the restrictions placed on the employee preclude using the time for personal pursuits.”  29 C.F.R. § 553.221(d).  Importantly, an employee’s ability to use on-call time for personal pursuits need not be identical or even substantially similar to his or her ability to use off-duty time for personal pursuits in order for the time to be considered non-compensable.

To determine whether an employee can use on-call time effectively for personal pursuits, the U.S. Department of Labor and the courts look at a variety of non-dispositive and non-exhaustive factors, including:

  • whether there are excessive geographical limitations on an employee’s movements;
  • whether the frequency of calls received or a fixed time limit for response is unduly restrictive;
  • whether the employee could easily trade on-call responsibilities;
  • whether use of a pager could ease restrictions; and
  • whether the on-call policy is based on an agreement between the parties.

U.S. Department of Labor Opinion Letter No. FLSA2008-14NA (Dec. 18, 2008), available at https://www.dol.gov/whd/opinion/FLSANA/2008/2008_12_18_14NA_FLSA.htm.

 Accordingly, to limit compensable on-call time under the FLSA, employers should allow non-exempt employees to trade/swap assignments, minimize restrictions on freedom of movement (to the extent that is even feasible given the current constrains occasioned by the COVID-19 crisis), and permit other unrestricted activities during on-call periods, and provide employees significant time, e.g., 30 minutes to one hour, to respond to calls, voicemails, etc.

What Should Employers Do?

Employers should review their practices to determine whether employees should be compensated for their waiting time or on-call time to ensure that they comply with the FLSA.

Importantly, state laws may differ with regard to both waiting time and on-call time.  Accordingly, employers should ensure that they are complying not just with the FLSA, but with the laws of the states where they operate.

The U.S. Department of Labor (“DOL”) has invited employers and employees to engage in a “national online dialogue” in connection with the expected April 2, 2020 implementation of the Families First Coronavirus Response Act (FFCRA).  The DOL is soliciting comments and questions as it develops compliance assistance materials and outreach strategies related to FFCRA.

Input may be offered online at https://ffcra.ideascale.com through March 29, 2020, or through Twitter chat hosted by @ePolicyWorks on March 25, 2020 at 2:00 p.m. using the hashtag: #EPWChat.

Employers may want to speak with their counsel about comments, questions, ideas or concerns to present to the DOL.

In an effort to slow the spread of the 2019 novel coronavirus (“COVID-19”), many employers around the country are encouraging—if not requiring—their employees to work remotely.  Although telecommuting during a public health crisis presents obvious benefits, it also presents employers with unique challenges, such as ensuring compliance with applicable expense reimbursement laws.

Employees working from home may incur any number of expenses – home computers, printers, Internet service, WiFi connections, smartphones and even paper, pens and other office equipment.

Under federal law, employers are generally not required to reimburse employees for their business related expenses.  However, employers cannot require employees to bear costs associated with necessary “tools of the trade”—i.e., equipment “used in or … specifically required for the performance of the employer’s particular work”—if the costs cut into the minimum or overtime wages required under the law.

This prohibition applies with equal force during a public health crisis.  Indeed, as part of a recent series of “questions and answers” published in response to the COVID-19 crisis (https://www.dol.gov/agencies/whd/flsa/pandemic), the United States Department of Labor (“DOL”) highlighted the prohibition against unlawful “kickbacks” in the telecommuting context.  More specifically, in addressing whether “businesses and other employers [are] required to cover any additional costs that employees may incur if they work from home (internet access, computer, additional phone line, increased use of electricity, etc.),” the DOL reiterated that “[e]mployers may not require employees who are covered by the FLSA to pay or reimburse the employer for such items that are business expenses of the employer if doing so reduces the employee’s earnings below the required minimum wage or overtime compensation.”

Employers implementing telecommuting programs in response to COVID-19 should therefore take care to ensure that the programs do not result in wage and hour violations under federal law when applied to specific employees.  For example, if employees must acquire new laptop computers or upgrade their Internet service in order to work from home, employers must ensure that the costs associated with those additional expenses do not cut into the required minimum wage or overtime compensation due.

Employers must also be mindful of state-specific expense reimbursement laws, which may impose additional requirements.  In California, for example, employers are obligated to reimburse employees for all “necessary expenditures or losses” the employees incur in carrying out their job duties.  The obligation to provide reimbursement applies regardless of whether an employee’s expenses cut into the minimum wage.  Reimbursement may also be necessary under California law even when an employee does not incur additional out of pocket costs.

In 2014, a California Court of Appeal held that employers are obligated to reimburse employees for a reasonable percentage of their cellphone costs, even when the employees do not incur any extra expenses in connection with their work-related cell phone use.  This requirement could have significant ramifications in the telecommuting context, where employees may utilize their own resources (e.g., Internet service, WiFi connections, cellphone, etc.) without incurring any additional out of pocket costs.

Given the complexities in this area of the law, employers implementing telecommuting programs should consult with counsel to help ensure compliance with applicable expense reimbursement requirements in their jurisdictions.

Employers in California have been inundated with wage-hour class actions for the past two decades.  And, time and again, they have had to deal with employee-friendly decisions from the California Supreme Court.

Leave it to the Ninth Circuit Court of Appeal to step in and put an end to a proposed class action, finding that there were no “real-world consequences” from wage statements that had an error in the employer’s name.

In Lerna Mays v. Walmart Stores, Inc., the plaintiff brought suit under California Labor Code section 226 after receiving her final pay stub, which listed her employer by a slightly different name – “Wal-Mart Associates, Inc.” instead of “Wal-Mart Stores, Inc.” That section requires employers to include certain criteria within employee pay stubs, including the name of the employer. Lab. C. § 226(a)(8).

Although it denied to certify a class on some claims, the District Court granted the plaintiff’s motion to certify a class on the claim that their wage statements were inaccurate. Wal-Mart appealed.

On March 17, 2020, the Ninth Circuit issued a decision reversing the order. The Ninth Circuit found that, while there may have been a technical violation of the statute, the plaintiff suffered no damages: “Apart from her confusion, [the plaintiff] did not suffer any real-world consequences flowing or even potentially flowing from the violation.”

Because she suffered no injury-in-fact, she lacked standing to bring her wage statement claim in federal court. Accordingly, the Ninth Circuit reversed the certification order and remanded the case with instructions to dismiss the wage statement claim.

In the coming days, weeks and perhaps months, many employers will have difficult decisions to make about their operations and their workforces.  With their operations shutting down or running at less than capacity, many employers will decide that they must lay off employees.

It’s a decision that no employer wishes for or enjoys.  And it is one that poses some risks.

Not only must employers take steps to ensure that layoff decisions are made in a manner that does not adversely impact protect groups, but employers need to be mindful of the various state laws governing when final wages must be paid to terminated employees. Failure to provide final pay to terminated employees in compliance with state laws can lead to significant penalties and litigation.

The chart below hopefully will be of help to employers that are facing layoffs.

State Termination Pay Requirements Relevant Statutes
Alabama No relevant statutory provisions. Recommend within next scheduled payday. No relevant statutory provisions
Alaska If employer-initiated termination, pay is due within three working days of termination.

 

If employee-initiated termination, pay is due on next scheduled payday that is at least three days from date of notice.

Alaska Stat, Sec. 23.05.140
Arizona If employer-initiated termination, pay is due within seven working days or next payday, whichever is sooner.

 

If employee-initiated termination, pay is due on next scheduled payday.

Ariz Rev Stat Ann, Sec. 23-353
Arkansas Pay is due on next scheduled payday. Ark Code Ann, Sec.11-4-405
California If employer-initiated termination, pay is due immediately upon termination.

 

If employee-initiated termination, pay is due within 72 hours of resignation.

Cal Lab Code, Sec. 201
Colorado If employer-initiated termination, pay is due immediately upon termination, or within six hours of start of next workday, if payroll unit is closed; 24 hours if unit is offsite.

 

If employee-initiated termination, pay is due on next scheduled payday.

Colo Rev Stat, Sec. 8-4-109
Connecticut If employer-initiated termination, pay is due no later than next business day after termination.

 

If employee-initiated termination, pay is due on next scheduled payday.

Conn Gen Stat, Sec. 31-71c
Delaware Pay is due on next scheduled payday through regular method, or by mail if requested by employee. Del Code Ann, tit. 19, Sec. 1103
District of Columbia If employer-initiated termination, pay is no later than next working day after termination.

 

If employee-initiated termination, pay is due on the next scheduled payday or within seven days, whichever is earlier.

DC Code Ann, Sec. 32-1303
Florida No relevant statutory provisions. Recommend within next scheduled payday. No relevant statutory provisions
Georgia No relevant statutory provisions. Recommend within next scheduled payday.  No relevant statutory provisions
Hawaii If employer-initiated termination, pay is due immediately upon termination, or by the next working day.

 

If employee-initiated termination, pay is due on next scheduled payday; however, if one week’s notice is provided, pay is due upon termination.

Haw Rev Stat, Sec. 388-3
Idaho Pay is due on next scheduled payday or within 10 days (excluding holidays and weekends), whichever occurs first. If requested by employee in writing, pay is due within 48 hours of request (excluding holidays and weekends). Idaho Code Ann, Sec. 45-606 
Illinois Pay is due at time of termination if possible, but no later than next scheduled payday. 820 ILCS 115/5

820 ILCS 115/4

Indiana Pay is due on next scheduled payday. Ind Code, Sec. 22-2-9-2
Iowa Pay is due on next scheduled payday. Iowa Code, Sec. 91A.4 
Kansas Pay is due on next scheduled payday. Kan Stat Ann, Sec. 44-315 
Kentucky Pay is due on next scheduled payday or 14 days following termination, whichever occurs last. Ky Rev Stat Ann, Sec. 337.055 
Louisiana Pay is due on next scheduled payday or within 15 days following termination, whichever occurs first. La Rev Stat Ann, Sec. 23:631
Maine Pay is due on next scheduled payday. Me Rev Stat Ann, tit. 26, Sec. 626 
Maryland Pay is due on next scheduled payday. Md Code Ann, Lab & Empl, Sec. 3-505
Massachusetts If employer-initiated termination, pay is due immediately upon termination.

 

If employee-initiated termination, pay is due on next scheduled payday.

Mass Gen Laws, Ch. 149, Sec. 148
Michigan Pay is due on next scheduled payday. Mich Comp Laws, Sec. 408.475
Minnesota If employer-initiated termination, pay is due within 24 hours upon termination.

 

If employee-initiated termination, pay is due on next scheduled payday.

Minn Stat, Sec. 181.13

Minn. Stat. Sec. 181.14

Mississippi No relevant statutory provisions. Recommend within next scheduled payday. No relevant statutory provisions
Missouri Pay is due immediately upon termination. Mo Rev Stat, Sec. 290.110 
Montana If employer-initiated termination, pay is due immediately upon termination, unless employer’s written policy extends time to next scheduled payday or within 15 days, whichever occurs first.

 

If employee-initiated termination, pay is due on the next scheduled payday or within 15 days, whichever

occurs first.

Mont Code Ann, Sec. 39-3-205
Nebraska Pay is due on next scheduled payday or within two weeks, whichever occurs first. Neb Rev Stat Ann, Sec. 48-1230
Nevada If employer-initiated termination, pay is due immediately upon termination.

 

If employee-initiated termination, pay is due on next scheduled payday or seven days after termination, whichever is earlier.

Nev Rev Stat, Sec. 608.020

Nev Rev Stat, Sec. 608.030

New Hampshire If employer-initiated termination, pay is due within 72 hours of termination.

 

If employee-initiated termination, pay is due on next scheduled payday; however, if the employee provided notice, pay is due within 72 hours of termination.

NH Rev Stat Ann, Sec. 275:44 
New Jersey  Pay is due on next scheduled payday. NJ Rev Stat, Sec. 34:11-4.3

NJ Admin Code, Sec. 12:55-2.4 

New Mexico If employer-initiated termination, pay is due within 5 days of termination.

 

If employee-initiated termination, pay is due within 10 days of termination.

NM Stat Ann, Sec. 50-4-4
New York Pay is due on next scheduled payday. NY Lab Law, Sec. 191
North Carolina Pay is due on next scheduled payday. NC Gen Stat, Sec. 95-25.7
North Dakota Pay is due on next scheduled payday. ND Cent Code, Sec. 34-14-03
Ohio Pay is due on next scheduled payday. Ohio Rev Code, Sec. 4113.15
Oklahoma Pay is due on next scheduled payday. Okla Stat, tit. 40, Sec. 165.3 
Oregon If employer-initiated termination, pay is due on the next business day following termination.

 

If employee-initiated termination, pay is due within 5 days; however, if the employee provided notice, pay is due within 48 hours of termination or next scheduled payday, whichever occurs first.

Or Rev Stat, Sec. 652.140
Pennsylvania Pay is due on next scheduled payday. If requested by the employee, the wages must be paid by certified mail. 43 Pa Stat Ann, Sec. 260.5

See Section 5(a)

Rhode Island Pay is due on next scheduled payday. RI Gen Laws, Sec. 28-14-4
South Carolina Pay is due within 48 hours, or next scheduled payday, not to exceed 30 days. SC Code Ann, Sec. 41-10-50 
South Dakota Pay is due on next scheduled payday. SD Codified Laws, Sec. 60-11-10

SD Codified Laws, Sec. 60-11-11 

Tennessee Pay is due on next scheduled payday or 21 days following termination, whichever occurs last.  


Tenn Code Ann, Sec. 50-2-103 

Texas If employer-initiated termination, pay is due pay is due within six 6 calendar days of termination.

 

If employee-initiated termination, pay is due on next scheduled payday.

Tex Lab Code Ann, Sec. 61.014

40 Tex Admin Code, Sec. 821.22

Utah If employer-initiated termination, pay is due within 24 hours of termination.

 

If employee-initiated termination, pay is due on next scheduled payday.

Utah Code Ann, Sec. 34-28-5 
Vermont If employer-initiated termination, pay is due within 72 hours of termination.

 

If employee-initiated termination, pay is due on next scheduled payday, or the following Friday if no regularly pay day.

Vt Stat Ann, tit. 21, Sec. 342

24-090-003 Vt Code R, Sec. VII 

Virginia Pay is due on next scheduled payday. Va Code Ann, Sec. 40.1-29 
Washington Pay is due on next scheduled payday. Wash Rev Code, Sec. 49.48.010
West Virginia Pay is due on next scheduled payday W Va Code Ann, Sec. 21-5-4
Wisconsin  Pay is due on next scheduled payday.

 

If ceasing business operation in whole or in part, within 24 hours of termination at usual place of payment.


Wis Stat, Sec. 109.03
Wyoming Pay is due on next scheduled payday. Wyo Stat Ann, Sec. 27-4-101

Wyo Stat Ann, Sec. 27-4-104

* This chart was prepared with the assistance of law clerk Eduardo Quiroga.