CoronaVirus / COVID-19 Some Employment Law Issues # 7 – DOL Issues Regulations Implementing FFCRA (Expanded FMLA and Sick Leave) and more...

Part 7 of our COVID-19 Issues for employers series concerns the U.S. Department of Labor’s new regulations implementing and interpreting the Families First Coronavirus Response Act. Check out the other six installments on the blog.

The Families First Coronavirus Response Act and its paid sick leave and expanded Family and Medical Leave Act provisions took effect on April 1, 2020.  Also on April 1, the U.S. Department of Labor issued “Temporary Regulations” implementing the FFCRA and its paid sick leave / expanded family leave protections. You can find the temporary regulations here.   They are “temporary” because they expire on December 31, 2020, along with the rest of the FFCRA. 

The text of the regulations themselves begin on page 83 of the .pdf document linked above.  The first 82 pages contain a summary of the regulations and address other administrative matters. The DOL’s preamble to the regulations is written in plain English. It’s a lot longer than the regulations, but the agency explains each section in detail.  

As regulations, these are more legally significant than the “fact sheets” and other helpful information the DOL has published on its website.  We discussed those in prior posts, such as this one right here.  If there are any discrepancies between the DOL’s FAQ’s and fact sheets and these regulations, the regulations will control.

The DOL is skipping the usual process of “notice and comment,” when it publishes draft regulations, receives input, and possibly makes changes. The DOL also is implementing the regulations immediately, not after the normal 30-day waiting period.  These actions are allowed under emergency circumstances like COVID-19, under the federal Administrative Procedure Act. 

However, those who wish to offer opinions / feedback to the DOL, the DOL is hosting a “National Online Dialogue”  about the FFCRA’s employment provisions.  The DOL is holding the “dialogue” until April 10.  You can sign up here. 

Here is the table of contents of the regulations, which will be published at 29 C.F.R. Part 826, immediately following the “normal” FMLA regulations.   Again, scroll down to page 84 of the .pdf linked above for the regulations themselves. 

Employers should carefully review these regulations along with the preamble explanations.  The requirements differ in a number respects from traditional FMLA.  Additionally, as stated, the regulations supersede the DOL’s guidance documents. 

The post CoronaVirus / COVID-19 Some Employment Law Issues # 7 – DOL Issues Regulations Implementing FFCRA (Expanded FMLA and Sick Leave) appeared first on Shaw Law Group.

       

“Unlimited vacation” / PTO is a once-popular buzzword from the before time, long since replaced on the buzzword popularity charts by “quarantine,” “social distancing,” “shelter in place,” and other less fun concepts.  We wrote an article about unlimited PTO here.  

Now, the California Court of Appeal has written about unlimited vacation as well.  The Court in McPherson v. EF Intercultural Foundation (here) upheld judgments in favor of EF employees who claimed they were entitled to payout of accrued, unused vacation at the time of their termination.  EF, however, claimed to have an “unlimited vacation” policy.  

As it turns out, one cannot just label any vacation policy “unlimited vacation” and escape accountability under Labor Code section 227.3. That section requires payout of accrued, unused vacation upon termination of employment. 

EF had a written vacation policy in its employee handbook.  It was “traditional” in that it granted specific amounts of vacation pay:

The 2014 handbook contains a vacation policy that provides salaried employees with a fixed amount of vacation days per month based on their length of service.5 Employees could carry over 10 accrued, unused vacation days from one year to the next. If an employee carried over more than 10 accrued vacation days, EF paid the employee 70 to 100 percent of the value of those days.6 Once an employee reached the maximum of yearly accruable vacation plus the 10 carryover days, the employee no longer accrued vacation until he or she used a portion of the accrued time. 

(Ignore that this policy is bad for a number of reasons).  Anyway this policy allegedly did not apply to some of EF’s employees, including “Area Managers” or the “West Coast Manager,” who were the plaintiffs in this case.  According to the Court,

plaintiffs could take time off with pay, but they did not accrue vacation days. Area managers did not use the online system to request time off or to track the number of days they had taken. Instead, they were required to notify their supervisors before taking time off. Taking time off during EHP’s peak season was “strongly discouraged,” but was approved in some circumstances. 

Unfortunately, the EF “unlimited vacation policy” was unwritten and contained no caveats or disclaimers about vesting.  The trial court referred to it as an “undefined” vacation policy, rather than unlimited.  The trial court held that this undefined policy could not be used to escape Labor Code section 227.3, and that the “undefined” amount of vacation due the plaintiffs was simply a problem of proof – how much vacation did the employer and employee really agree to.  The trial court then borrowed from the written “traditional” policy, and deducted an estimate of how much vacation the employees took during their employment. 

On appeal, the Court of Appeal first determined that EF’s “unlimited vacation” policy *was* in fact covered by section 227.3, because it wasn’t in reality an unlimited policy:

we need not decide whether vacation wages are earned under an unlimited policy—whether “uncapped time off equate[s] to ‘vested vacation’ ”—as that is not the policy here. Not only was EF’s policy not in writing, but the record demonstrates EF never told plaintiffs it had an “unlimited” vacation policy or that their paid time off was not part of their compensation. EF may call its vacation policy “unlimited” or “uncapped,” but substantial evidence supports the trial court’s finding that it was not. 

The Court of Appeal also determined that the policy indeed prescribed limits on vacation and therefore was not really “unlimited.”

EF’s policy in practice was to give plaintiffs some fixed amount of vacation time. … EF expected plaintiffs to take vacation in the range typically available to corporate employees (such as two to six weeks), not an “unlimited” amount—for example, more than would be available under a traditional accrual policy

(emphasis added).  

However, the Court conceded that no employer has to allow employees to take 365 days of vacation a year as part of an unlimited plan.  The Court did say, however, that one sure sign of an “unlimited” vacation plan is the ability to take more vacation than one would be able to under a traditional plan:

By “unlimited,” we do not suggest EF intended to permit area managers to take vacation 365 days a year. After all, the premise behind vacation pay is that it is deferred payment for the employee’s labor. And, as our Supreme Court has acknowledged, section 227.3 “does not purport to limit an employer’s right to control the scheduling of its employees’ vacations.” (Suastez, supra, 31 Cal.3d at p. 778, fn. 7.) But as amici have described them, and the trial court noted, one would expect unlimited time off policies at least to afford employees the ability to take longer or more frequent periods of time off than a traditional accrual policy or allow employees to work fewer hours in lieu of having more vacation days.  

The Court also decided that these additional facts supported the trial court’s conclusion that EF’s plan was not “unlimited” and was really an accrual plan in disguise:

• workload and actual opportunities to take vacation imposed an “implied cap” 
• EF never communicated to its employees that there was “unlimited” vacation

  • This is all plaintiffs were told: as area managers they could take paid vacation outside of the busy season, but their vacation did not accrue.20 The only other parameters EF clearly told plaintiffs were (1) they had to notify their supervisor before taking time off and ensure they could complete their work, and (2) they did not need to track their days off in the online system because they did not accrue vacation.  ****no one at EF, for example, told plaintiffs they did not accrue vacation because they—unlike employees subject to the accrual policy—could take as much vacation as they wanted. Although plaintiffs understood they could take time off when their schedule permitted, they testified they did not understand the policy to be “unlimited,” as EF contends it was.

• A true “unlimited” policy that falls outside the bounds of section 227.3 “must be express and clear.”
• EF’s policy did not warn employees in advance that if they did not take time off it would be lost to them.   

The Court emphasized that *some* unlimited PTO / vacation plans will not require payout upon termination and do not “vest” benefits:

We by no means hold that all unlimited paid time off policies give rise to an obligation to pay “unused” vacation when an employee leaves. Flexible work arrangements and unlimited paid vacation policies may be of considerable benefit to employees and to the employers who want to recruit and retain those employees. Employees and employers are free to contract for unlimited paid vacation, consistent with the Labor Code and governing case law.

The Court then set out some guidance –  factors that would establish “unlimited vacation” does not create a vested right that is payable upon termination of employment: 

a policy may not trigger section 227.3 where, for example, in writing it

(1) clearly provides that employees’ ability to take paid time off is not a form of additional wages for services performed, but perhaps part of the employer’s promise to provide a flexible work schedule—including employees’ ability to decide when and how much time to take off;

(2) spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off;

(3) in practice allows sufficient opportunity for employees to take time off, or work fewer hours in lieu of taking time off; and (

4) is administered fairly so that it neither becomes a de facto “use it or lose it policy” nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off.

Unlimited paid time off under such a policy—depending on the facts of the case—very well may not constitute deferred compensation for past services requiring payment on termination under section 227.3. 

Separately, the Court held that a general release did not apply to claims for unpaid vacation because of Labor Code section 206.5.

Section 206.5 prohibits an employer from requiring an employee to release a claim for wages that are due and unpaid unless it has paid those wages. (§ 206.5, subd. (a).)27 Section 206.5 thus provides an exception to a general release of wage claims—known or unknown. That exception is limited, however. Wages are not considered “due” under the statute if the employer and employee have “a bona fide dispute” as to whether they are owed. (Chindarah v. Pick Up Stix, Inc. (2009) 171 Cal.App.4th 796, 803 (Chindarah).) Section 206.5 therefore does not preclude an employer and employee from “ ‘compromis[ing] a bona fide dispute over wages.’ ” 

At the time one of the plaintiffs signed a general release, she and EF had not engaged in negotiations about vacation pay due, or specified that the consideration in the release was the resolution of a “good faith dispute” about vacation pay.  Therefore, the vacation pay claim survived the general release because vacation pay is a form of wages, subject to section 206.5.

Finally, one of the plaintiffs moved to Virginia, years before her employment ended. She did, however, spend periods of time each year in California.  The Court of Appeal held that California’s vacation law, Labor Code section 227.3, did not apply to true non-residents performing most of their work outside California, and only sometimes working within California. The Court distinguished the California Supreme Court’s decision in Sullivan v. Oracle, which held that California has a strong interest in ensuring its overtime laws apply to non-residents if they perform substantial work in California.  The Court stated that overtime is not the same as vacation, and that Sullivan does not apply to all California wage and hour laws automatically.

The exclusion of a nonresident, temporary worker from section 227.3 does not implicate the same concerns as the exclusion of nonresidents from California’s overtime laws. Although section 227.3 serves the important goal of ensuring California workers do not forfeit vacation wages when their employment ends, it does not protect workers’ and the public’s health and safety or “expand[ ] the job market by giving employers an economic incentive to spread employment throughout the workforce” as do California’s overtime laws. 

To sum up: this case makes it difficult for employers to offer “unlimited vacation” without jumping a number of hurdles.  The Court here provides guidance, but much of it may not be binding because it is considered “dicta.” Certainly the Court is leaving open the possibility that unlimited vacation policies could be upheld without requiring payout at termination. But the Court’s guidance suggests that such policies will be the exception not the rule. 

Employers and their lawyers therefore should review “unlimited vacation” policies to see if they are worth pursuing, and whether they can be drafted to satisfy the Court’s guidance here. 

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Greetings and welcome to installment # 6B of our series.  Please read the rest of the series on the blog here.  Don’t forget the resources page here updated as of 3/25/20.

This is our third FFCRA post.  The U.S. Department of Labor has published a webpage to help employers with the Families First Coronavirus Response Act, or FFCRA.  It’s here. 

The DOL has been adding to its FAQs on the implementation of the FFCRA, which takes effect on 4/1/2020.  If you’ve read the previous posts and FAQ’s, the new ones are 38-59 if my math is right.  Here are the highlights:

• Length of Service. Otherwise covered employees must be employed by covered employers 30 days for the childcare leave under FF-FMLA, but any employee is eligible for the paid sick leave. Q 38.
• Reinstatement Rights. Reinstatement rights are similar to under FMLA.  In the context of COVID-19, “shelter in place” or state closing orders (and faltering businesses), employees are not entitled to reinstatement if their jobs are eliminated. – Q 43.  NB – Employers voluntarily undertaking layoffs must be careful regarding selection of whom to layoff, as in any other circumstances, to avoid discrimination claims or claims of interference with leave rights.
• Total leave – The amount of FF-FMLA is reduced by how much “regular” FMLA the employee may have taken during the applicable measuring period – in the before time.  That is, if an employee took 10 weeks of leave for baby bonding during the 12 months preceding a leave request under FF-FMLA, the maximum FF-FMLA available is 2 weeks.  However, paid sick leave is available regardless of how much previous FMLA the employee took.  Q 44.
• Federal Sick Leave Is Extra Time – The 80 hours maximum of federal sick leave is always on top of any other sick leave the employee may be entitled to under law, collective bargaining agreement, or policy. Q 46.
• Public Sector Employee Leave Rights – See QQ 52 and 53. 
• “Health Care Providers” Exempt from Leave – The DOL defines “health care providers” exempt from the leave entitlement (at the employer’s option) different from the way it defines “health care providers” who can provide medical certification. Health Care Providers potentially exempt from leave is very broad and includes just about anyone employed in a health care-related setting.  Q 56. 
• Small Business Exemption:  The DOL explains the elements of the small business exemption from certain leave requirements (Q 58) as follows:

  An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:

  1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;  
  2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or  
  3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity. 

Note that this FAQ set is not a formal regulation (particularly regarding the small business exemption). But it likely previews the DOL’s formal regulations on the matter. 

Note also that the “small business” exception does not eliminate the obligation to provide all paid sick leave. It applies only to the paid sick leave for “school or place of care closures or child care provider unavailability for COVID-19 related reasons.”  For more detail on the FFCRA Paid Sick Leave obligations, please read the other FAQs and our post here. 

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Here are some of the things we regret that we did not blog about in the past few weeks because of  the Coronavirus coverage that’s been keeping everyone so busy: 

U.S. Department of Labor Opinion Letters 

The U.S. Department of Labor issued some Wage and Hour opinion letters that applied some of its new “regular rate of pay” regulations. 

Length of Service Bonuses and Regular Rate – First, in FLSA2020-3, the Wage and Hour Division explained that a “longevity payment” would be included in the regular rate, when it was not discretionary. 

Employee Referral Bonuses –  In FLSA2020-4, the Division opined that a two-installment, employee referral bonus, paid to non-HR workers for referring new hires, was not included in the regular rate of pay. The first installment was earned when the new employee began work and fell within the exclusion from the regular rate for referral bonuses unrelated to normal work activities.  However, the second half of the referral bonus required the referring employee to remain with the company for a year (not the new hire).  As such, the second half of the referral bonus was a longevity payment and likely was properly included in the regular rate, unless additional facts proved otherwise.  If the candidate had to stay with the employee for a year for the referring employee to receive the second half of the bonus, it probably would have been excluded from the regular rate. 

Payment of Life Insurance Premiums – In FLSA2020-5 the Division clarified that the employer’s payment of life insurance premiums for non-exempt employees’ insurance policies did NOT have to be included in the regular rate even if the IRS would say the premiums were taxable as income.  So, the employer was paying for the employees’ premiums on policies worth greater than $50,000.00 in benefits.  These premiums had to be included in gross income to the employee. The DOL, however, said it is immaterial how the IRS treats the benefit. Rather, the question for whether benefits are included in the regular rate depends on the Fair Labor Standards Act, in particular, section 7(e)(4) (excluding “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees”).

Attorney- Client Privilege

A person who files a charge with the Department of Fair Employment and Housing (Charging Party) is not a “client” of the DFEH’s lawyers.  Therefore, communications between the charging party and the DFEH’s lawyers are not privileged by the attorney-client privilege.  That’s what the Court of Appeal held in Wood v. Superior Court (here).

Fair Credit Reporting Act

Time to make sure your credit check  /  background check forms are legal again.

The Court of Appeals for the Ninth Circuit decided in Walker v. Fred Meyer, Inc. that the employer may have violated the Fair Credit Reporting Act by including “extraneous” information in its disclosure document. The Ninth Circuit wants a very limited disclosure statement under the statute, as its precedents in recent years have made clear.  

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Hello and welcome to installment # 6A of our posts on COVID-19 / Coronavirus issues related to employment law.   Check out the other posts and our updated resources page on the blog.

Yesterday, the U.S. Department of Labor issued a second round of FAQs and Guidance on the Families First Coronavirus Response Act (FFCRA). That’s the law that expands the FMLA to cover childcare leave for most employees affected by school closings and unavailable caregivers. FFCRA also provides for paid sick leave.  Read our initial analysis of the statute here.   

The DOL’s new guidance adds on to the FAQs on its COVID-19 / FFCRA special web page here.  We posted about the DOL’s initial guidance here. 

The new information (questions 17 and on) addresses some important matters such as: 

• Intermittent FFCRA-FMLA / sick leave for COVID-related childcare is available, but only if the employer allows it, and only if the employee is teleworking.  “You may take intermittent leave in any increment, provided that you and your employer agree.” – Q20.  Q21 addresses the telework v. office work issue.
• No paid leave is available to employees laid off if the employer closed the worksite before April 1, 2020.  Q 23.
• After the April 1 effective date, paid leave ceases in the case of an employer closing, or implementing a layoff of an employee, while an employee is on leave; however, the employee is due payment for any qualifying leave taken before the closure.  Q 25, 26.  The answer is the same whether the closing / layoff is temporary or permanent.   The DOL points out that the employee may be entitled to unemployment benefits rather than leave payments.
• Employees may not “pyramid” other forms of paid leave (such as PTO or employer sick time) on top of the paid federal leave, over and above 100% of their compensation. The DOL takes the position that the employer must agree to any coordination of employer paid leave and federal paid leave.  Q31. However, if state or local law requires employers to allow the use of PTO or paid sick leave, employers should check with counsel regarding how to proceed.
• Employers may not require the employee to add PTO/employer provided benefits to federal leave benefits. Only the employee may elect to do so.  Q33.

It is important to note that the DOL’s guidance, helpful as it may be, is not binding on the courts. The website, FAQs, and fact sheets are not regulations. So, the courts are not required to follow them.   the statute itself is the only binding authority thus far.  And, frankly, some of the DOL’s positions are not addressed in the statute. Therefore, some of the DOL guidance may turn out to be inconsistent with the statute, as interpreted by a court.  For now, though, this is the only guidance we have.  So, be careful out there.

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