As millions of Americans figure out how to safely navigate the workplace or continue working from home, often while juggling their children’s education and other priorities, the concept of business continuity has come into sharp relief. Against an ever-changing backdrop of social distancing, supply disruptions, and general anxiety, managing the COVID-19 pandemic—and resulting business disruptions—requires swift but delicate action.
Managers, HR personnel, and other business leaders must juggle the needs of their staff (many of whom may be facing furloughs or outright job loss) with the unprecedented business disruptions caused by the global health crisis.
If you haven’t done so already, now is the time to dust off your business contingency plan and update it as needed. Do you have a plan of action in place for emergencies, and is it in compliance with all applicable laws? We’ll answer some questions you may have about business continuity amid the coronavirus crisis, with a focus on legal considerations such as contracts and HR policy.
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Our entire staff is now working from home, but this is new for our company. How can I assure that our staff remains productive (within reason) while maintaining legal compliance?
A great first step (preferably before you implement a remote work policy) is to draft a Work from Home Agreement, which should include guidelines to motivate productivity, facilitate regular communication and check-ins, and ensure legal compliance. Your policy may cover the following:
- Hours when an employee is considered “available” for business purposes
- Adoption of online tools to integrate and manage workflow, such as Google’s popular G Suite
- Modes of communication (email, chat, and video conferencing)
- Federal, state, and local wage and hour law compliance including time, meal break, and rest period reporting
- Liability waiver for injuries that occur at home
- Procedures for safeguarding any confidential or sensitive company data
Different legal standards may apply depending on whether your staff are salaried or hourly employees, or if they are independent contractors, so it is important to ask a lawyer about the best approach for your situation.
Also, remember that working from home is a new experience for many. Even employees who have done it before may now be trying to stay productive while in close contact with other family members, including school-aged children. In other words, provide the support your team needs to stay productive but give them time to transition and don’t have unreasonable expectations.
What types of leave are available to my employees during the COVID-19 crisis?
Make sure you understand the usual employee protections and employer responsibilities, such as the federal Family Medical Leave Act (FMLA) and state leave options. You should also be aware of employee leave protections that were included as part of the Families First Coronavirus Response Act passed on March 18. Key provisions include:
- Two weeks of paid sick leave. This applies to employees ordered to quarantine (by a medical professional or applicable law), seeking a COVID-19 diagnosis or already diagnosed, or caring for someone else who has been diagnosed. This also applies to parents who are unable to work during their child’s school closures.
- Public health emergency FMLA leave for parents. This applies to parents who are unable to work (or telecommute) if their minor child’s school is closed or their child care provider is not available due to a public health emergency related to COVID-19. This is structured as two weeks of unpaid leave followed by 10 weeks of partially-paid leave.
Employees who don’t qualify for FMLA or paid sick leave may also use their existing paid time off or sick days, or—subject to employer discretion and policy—take an extended leave of absence.
The guidelines for calculating partial wages and offering job protection in relation to emergency leave are complex, so if you have questions as an employer, it is best to talk to a lawyer.
We have to reduce our workforce as a result of the coronavirus pandemic. What is the difference between layoffs and furloughs?
A furlough is a mandatory suspension of work without pay. Unlike a layoff, which terminates employment permanently, a furlough sets the expectation that the employee will return to work at some point. Both furloughed and laid-off workers are eligible for unemployment insurance benefits. Furloughed employees also retain their health care, life insurance, and other benefits—which is not the case for laid-off employees.
When placing employees on furlough, you’ll typically provide a date on which you anticipate their return to work, or a certain condition. In the case of the COVID-19 pandemic, that condition may be the point at which non-essential businesses are allowed to open once again.
What are the most important legal guidelines to consider when making workforce reductions?
Legal considerations aside, it’s important to understand that reductions in workforce can cause a significant amount of stress within an organization, so make sure you treat all employees with compassion in the process. Notify the entire staff and be honest about your plans, giving each employee an opportunity to ask questions in private.
There are some issues you should be aware of when determining layoffs:
- You may use tenure to lay off employees, with the most recently hired employees being laid off first
- You may not discriminate based on age, disability, or other federally protected classifications
- You can lay off entire departments; but if you’re keeping some employees, you must make sure their retention is based on a standard set of guidelines
- The federal Worker Adjustment and Retraining Notification (WARN) Act has certain requirements for when a company plans a mass layoff
- While you are not required to offer severance pay, you may be required to pay accrued (but unused) paid time off, vacation, or sick time
In addition to the guidelines for layoffs, you should also consider the following before you furlough your employees:
- You can target higher-paid workers for furlough, but keep in mind that such a move (if blatant) can hurt morale
- Furloughed workers are subject to a strict do not work order, so if an employer either expects or knowingly permits furloughed workers to check their email or do any work-related tasks, they may have committed a “suffer or permit to work” act (meaning the employee may be entitled to compensation or relief)
- You may legally furlough some workers and lay off others within the same company, but make sure you do so tactfully. Those who are laid off will have to find work elsewhere, so there’s likely to be some tension.
What should I tell employees who I’m laying off with regard to unemployment benefits, health care, and any other benefits to which they may be entitled?
As discussed, furloughed workers are still legally employed and thus entitled to health care insurance, life insurance, and other non-wage benefits. But since you’re severing your ties with an employee when you lay them off, they are not entitled to these benefits (unless contractual obligations say otherwise). Also, you are not required to pay severance.
That said, you should inform terminated employees about their eligibility for unemployment benefits and continuation of their health care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
In addition to the standard unemployment insurance administered by each state, the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily allows for the following federal benefits:
- An extra $600 in weekly benefits, in addition to regular state benefit amounts
- Additional 13 weeks of UI coverage once state UI benefits are exhausted (if prior to the end of 2020)
- Expanded eligibility, which includes independent contractors, “gig economy” workers, and other self-employed workers, for up to 39 weeks of benefits
Check your individual state’s unemployment website and the U.S. Department of Labor website for additional information.
As a result of drastic workplace changes, vendor contracts for perks such as catered lunches, massages, and a stocked pantry are no longer needed. May I renegotiate or be released from these contracts?
When your employees are no longer coming into the office, you really don’t need lunchtime sandwich deliveries, weekly coffee and snack delivery, or other such perks many employees receive in the workplace. You also don’t need regular cleaning service, printer repair, landscaping, or other facilities-related services. But you’re still bound by contracts.
Start off by reviewing these contracts, looking at any cancellation or renegotiation language. Even if these terms aren’t explicit in the contract, you should approach vendors with a spirit of cooperation and compromise. You don’t want to pay for pizza every Friday that won’t be eaten, for example, but the food delivery service will want to resume these deliveries (and keep your business) once things get back to normal.
If you and the vendor agree that modifying the terms of the contract is beneficial to both parties, you may amend the contract accordingly. If both parties agree to end the contract entirely, you’ll want to draft a Mutual Rescission and Release Agreement to formally relieve you (and the vendor) of your obligations.
What if the vendor isn’t willing to renegotiate or release our company from the contract? Do I have any legal recourse?
Since the massive business disruptions caused by the coronavirus pandemic were largely unforeseen prior to the World Health Organization’s (WHO) March 11 declaration, you may be able to invoke the force majeure clause if it was included in your contract. This clause releases you of your contractual duties when a so-called “act of God” makes its terms impossible, but only if the list of possible acts of God includes language alluding to the current crisis, such as “pandemic,” “epidemic,” “contagion,” or “public health emergency.”
The intervening event must be due to no fault of the party invoking the clause, must be the actual reason why the terms cannot be fulfilled, and must have been unforeseen. Contracts entered into after the WHO declaration, governmental health advisories, or the issuance of stay-at-home orders may not meet the threshold of unforeseeability. If you have questions, a lawyer can review your contract and help you identify next steps.
Can we renegotiate our office lease agreement?
As with other types of contracts, your Commercial Lease Agreement should include the conditions under which either party may terminate the lease. It may also have a force majeure clause. That said, the best solution usually is a non-adversarial one. You may be able to renegotiate the terms of your lease rather than terminate it altogether. Besides, if you plan to return to the space after your business re-opens, you may likely want to avoid the hassle of moving out and paying to store your property elsewhere temporarily.
As the COVID-19 pandemic continues to affect the lives of so many, the job of a people leader will continue to require agility and speed to stay legally compliant. Visit the Rocket Lawyer Coronavirus Legal Center, a free online legal resource where you can access legal documents, ask a lawyer for specific advice, and browse relevant topics.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
- Business Continuity: A Legal Take for People Leaders - 05/04/2020