As every business owner knows, the economic position of a business fluctuates over time. There are ebbs and flows that require strategic decision-making to weather the negative impact on the overall operations. However, with such planning, most of these negative economic patterns generally do not substantially challenge the life of the business, and companies can bounce back relatively quickly.
Unfortunately, with the COVID-19 virus outbreak, that has severely crippled the country’s economic stream, many businesses have found themselves in unprecedented circumstances that require drastic adjustments to their operations and practices to facilitate any chance of survival.
While the government has implemented many rules and regulations to help decrease the spread of the virus and allow some businesses to remain open, e.g., work from home, social distancing, etc, the majority of businesses are feeling the crunch of loss of customers and will have to make critical decisions to continue, even on the most elementary levels.
Laws Are Still In Force
While the government may have relaxed somewhat due to the crisis, it is important, however, to keep in mind that enforcement through the Department of Labor, who administers the Fair Labor Standard Act, is still operating and requires businesses to continue to follow the minimum payment, and wage and hour laws. In addition, the Equal Employment Opportunity Commission (EEOC) and the Americans with Disabilities ACT (ADA), among many other laws, are still in place to prevent discriminatory practices and other unlawful business behavior.
Reducing Staff: Staff reductions remain one of the most uncomfortable choices that any business owner might need to make. Deciding to reduce staff should be done in an articulable, objective manner with a well-thought-out plan that can defend against discrimination claims. If your staff reduction has the optics of being discriminatory, for example, certain groups are more affected than other groups, e.g., male vs. female, you can face a claim of wrongful termination and be subject to an investigation and if found unlawful, possible penalties, fines and backpay exposure, and in some instances, punitive damages. Furthermore, depending on the size of your business and how many employees are being laid-off, you may be subject to the WARN ACT and as such specific processes and notifications are required. It is always best practice to seek the guidance of an HR or legal professional to walk you through the steps of such a process before affecting anyone’s employment.
In accordance with the Fair Labor Standards Act, there are two types of wages. There are wages that are paid to employees exempt from overtime, and those which are paid to a non-exempt employee. To be exempt from overtime requires a fact test to see that certain elements are met, and is not merely determined by how you pay someone (i.e., paying someone a fixed salary each pay period does not by itself exempt that person from overtime). You are also required to meet minimum wage standards as well, as determined by the Department of Labor. Additionally, while a non-exempt employee is only required to be paid for hours worked, an employee classified as exempt is paid by the week and the salary cannot be reduced due to quality or quantity of work done in that week. For example, if an exempt employee has a salary of $1,000 a week, that amount should be paid to the employee regardless of the number of hours worked. Therefore, the salary cannot be reduced by the number of hours worked. There are some specific ways that an employer can implement a salary reduction for an exempt employee and still meet the laws. However, employers must be very careful in doing so. Therefore, if you decide you need to reduce the salary of an exempt employee, it is suggested you reach out to an HR or legal professional for guidance to ensure that you maintain compliance with the labor laws.
This Too Shall Pass
We will get through this, certainly not unscathed, but there is light at the end of the tunnel and a variety of resources that have been recently made available to all business types, including sole proprietors and independent contractors. When we do, it is imperative for businesses to plan for the future and have a Crisis Management Plan in place to help lay the foundation of what to do in any situation that can hamper the ability of your business to run as usual. Plan for the impact on your business, your customers and your employees. What are the critical needs? How quickly can you communicate these needs to keep your business running as much as possible? Who is in charge? How do you get this message to the people that need this knowledge?
The COVID-19 outbreak is hopefully an anomaly and we will not experience such a widespread catastrophe and disruption to our way of life again. What it has exemplified, however, is that businesses must have plans in place and acute adaption skills to continue to have the ability to function (at best) under the most menacing of situations.
We hope that with some economic relief, many of our great businesses can come alive again and be prosperous. Be Safe…Stay Healthy
Consolidated Human Resources is a nationwide full-service payroll, insurance, benefit, and human resources consulting firm that provides customized human capital management solutions. We can be reached at (877) 801-8400.