EMD&R COVID-19/STATE OF EMERGENCY ADVISORY FOR BUSINESSES IN MASSACHUSETTS AND NEW HAMPSHIRE
At EMD&R we are getting phone calls from our business clients and as such, we are pulling together this email to keep you posted on those questions from clients and public statements of governors and mayors that may impact your business.
First and foremost, think in the best interest of your employees and the public health. States have broad latitude when operating in a public health emergency, and for obvious reasons you want to comply with any local directives from local and state authorities.
Presently the main thrust of any directive is to do nothing! In short: to stop and stay home and keep a safe distance to avoid spreading the virus.
This is not easy. Your business is imperiled but when the answer is to do nothing for several weeks to contain the viral spread, this is painful. It is even harder for people in business because you did not go into business to do nothing — you live to solve a problem or to deliver a service to your valued customers, clients, and employees.
Things are moving swiftly, and one thing is for sure: things will continue to change at a rapid pace.
Under these circumstances, it is best to make business decisions thinking in the short term — that is week to week or month to month. You may need to close your doors or drastically reduce hours temporarily.
In a temporary shutdown, it may be necessary to take some or all of your employees off of payroll. There are several methods to doing this, each with certain advantages and disadvantages.
Making Employee Part Time: The law allows for a reduction to include reducing hours but keeping the employees on in a part-time capacity. In this approach, they are eligible for unemployment even though they are still working for you. The employee must report the income earned and will impact the amount of their benefit but not their eligibility for unemployment compensation. This is a good option in a temporary shut down and may be an option you want to explore with your critical employees.
“Once the earnings reach a certain amount, your unemployment benefits will be reduced on a dollar for dollar basis until you reach the amount of your weekly benefit, in which case, you will be ineligible for that week. This calculation is done on a weekly basis, so you need to accurately report your earnings to DUA each week.” See Department of Labor Guidance on COVID-19.
Lay Offs: A layoff is when you terminate an employee for reasons of work stoppage, or there is simply nothing for them to do. This functions as a termination of employment, however, and you will be expected to pay all wages, including unused vacation time, on the day of the layoff, at least if you are a Massachusetts employer. Your employees will lose whatever benefits they have access to presently, and COBRA may be their best option moving forward to ensure continuous health coverage. Upon laying off the employee, you no longer have an obligation to fund any part of their health insurance.
Laid-off employees will be eligible for unemployment, and while you may rehire these individuals, seniority in your company, if relevant, may be lost. You must also provide any employee being laid off information on how to apply for COBRA if they are losing benefits, as well as information on how to apply for unemployment.
Furlough: A furlough is a mandatory time off without pay. This is the most likely option for most employers, assuming that the crises do not stretch out too far into the future. Furloughs do not trigger a loss of employment, and it is expected that the employee will return to their positions as soon as matters improve. Your employees may receive unemployment while on furlough and may retain their health insurance and other benefits. Remember, however, that these plans must continue to be funded throughout the furlough period and will represent a drain on your company’s resources.
If you do choose to furlough workers, it is imperative that they perform absolutely no work during the furlough period. This means not answering a single phone call, or responding to a single email. If you have salaried employees on furlough, and they perform any of these tasks, they must be paid their salary for the entire week. Hourly employees must be paid their wages for the time actually worked.
If you work with a union, it is important to read the collective bargaining agreement carefully. You may be required to negotiate the terms of a furlough.
My Employees Want or Need to Stay Home
With the rising danger of COVID and the new reports of its effects, some of your employees might want to stay at home to avoid infection, are sick themselves, or are caring for someone who is ill.
Under the current Department of Labor guidance, if a worker is quarantined by order of a civil authority or by a medical professional, or leaves work because there is a risk of exposure to the virus, or to care for a family member, that worker can apply for unemployment benefits for the duration of their quarantine. They need not provide special documentation, and may simply return to work when able.
Employers Following Guidance and Advisories
What is the legal significance of “Guidance” and “Advisories?” As an employer, you should pay attention to the breaking Advisories and Guidance coming from mayors and governors as well as public health officials that may issue or be revised daily.
While these are not legal permanent legal changes to existing law, they have legal consequences generally to address emergency situations such as we are facing now.
There are also issues related to exemptions from such Guidance and Advisory decrees that need to be read carefully. If you are in an essential source related industry, use your best judgment with a caveat that protects your employees and the public from virus spread.
Setting up industry-related protocols for a safe work environment. Consider your systems in place and revise and adjust to adapt to the current climate. These policies should adapt by reference all public health guidance and warnings for worker safety including social distancing, isolation, and quarantine, and presume anyone with flu-like symptoms would test positive for the COVID-19 virus until real test results can be obtained.
What about my employees’ health insurance? For a laid-off employee, your obligation to carry health insurance ends but you must comply with the Wage Act in Massachusetts and pay all vacation and PTO leave and comply with the procedural aspect of the law.
For a furloughed employee, you would continue to pay their health insurance but they cannot actively do any work.
For the part-time/reduced hour employees that would collect unemployment, it is recommended you continue to pay health care.
Independent Contractors, Force Majeure, and Frustration. Many of you may employ independent contractors rather than traditional employees. In this case, you may find they have difficulty meeting their contractual duties, or you may find you have trouble paying them for their work. Under these emergency circumstances, you may look to two legal frameworks for answers.
Force Majeure is a legal term that excuses a party from performing a contract when circumstances beyond their control prevent performance. Review your contracts carefully for force majeure clauses, as these will be controlling as to whether performance of the contract is simply excused, or if you must mitigate your damages.
If your contract does not have a Force Majeure clause in it, you may also look to the legal doctrine of Frustration for relief. Frustration means that a change of circumstances is so fundamental that you simply cannot perform a contract as written.
For example, say you are a small manufacturer of auto parts employing independent contractors for most of your line-work, paying them per diem for the term of a year. If you are ordered to close by the governor and have zero cash flow, you may be excused as the purpose of the contract is now frustrated. Both Force Majeure and Frustration are very circumstantial and will be unique to each business. If you believe you have a Frustration or Force Majeure issue, please do not hesitate to contact us.