March 24, 2020
Facing the impact of COVID-19 while wishing to reserve the capacity of New Jersey’s health care system for the most vulnerable, Governor Phil Murphy on March 21st signed Executive Order No. 107 which directs all New Jersey residents to stay at home until further notice. This unprecedented measure effectively puts many New Jersey workers and their employers out of work or out of business with the exception of those performing “essential services” or whose workers can perform services remotely from their homes.
Employers that do not fit into these exceptions now face potentially massive losses and the need to address employment issues with now idled employees. Employers want to know what they can/must do under such circumstances. Contract law and New Jersey’s complex and comprehensive employment laws, such as the NJ Paid Sick Leave law, create substantial legal impositions for employers.
An employer’s first step should be to evaluate each employee’s current status. Termination may be necessary, but assuming that it is intended for the employee to resume employment once conditions permit, how should the termination be classified? A term that is frequently applied to such circumstance is “lay off.” But what is that?
In the absence of contractual authority, a lay-off is frequently defined to be an involuntary employment separation occurring through no fault of the employee. A “temporary” lay-off implies the parties’ intention that the affected employee will be re-employed once conditions permit. Laid-off employees are usually eligible to collect unemployment compensation up to a maximum of 26 weeks or until re-employed if sooner.
In the turmoil and confusion of the present time, employers are attempting assess what must be done to survive. As a first step, determine what is owed to employees, starting with a review of the Company’s Employee Handbook if one exists and other pay policies. What do these policies say regarding the grant of non-statutory paid time off (PTO)? New Jersey law permits the forfeiture of unused PTO days if employment has ceased for any reason provided the policy provides for such forfeiture. If an employee has the protection of a written employment agreement, such agreement may address the issue of severance. It is not too late to revise your Handbook (at least prospectively) provided the Handbook expressly states that it is not a contract and may be revised at any time.
Regarding New Jersey’s Paid Sick Leave Act, the law provides that payment must be made for:
…Time during which the employee is not able to work because of a closure of the employee's workplace, or the school or place of care of a child of the employee, by order of a public official due to an epidemic or other public health emergency, or because of the issuance by a public health authority of a determination that the presence in the community of the employee, or a member of the employee's family in need of care by the employee, would jeopardize the health of others….
While there is and should be much concern for the welfare of the affected employees, many employers now face a struggle to survive. Effective on April 2, 2020, the Families First Coronavirus Response Act (“FFCRA”) wil l go into effect . This decisive Congressional action creates two new programs: first, the grant of ten (10) paid sick days for employees to permit the paid absence from work due to personal or familial COVID-19 illness issues; and second, the grant of a very liberalized paid family leave for all employers with 500 or less employees and covering virtually all employees who have worked for 30 or more days.
The law provides for possible recompense to employers for such costs through tax credits and/or possible tax refunds if credits are insufficient, but such relief will not be realized tor at least 90+ days. In many cases, smaller employers in particular may not survive to receive such benefit.
The FFCRA will be effective as of April 2nd. We expect that it will be applied only prospectively. Struggling employers must carefully consider whether layoffs should be imposed before that law is effective as a defensive measure. Waiting until the effective date will guarantee the payment of two weeks’ pay to all employees who are still employed as of that date (unless it is determined that employees can be terminated while being paid pursuant to the FFCRA) plus the possible grant of the many other benefits attendant to the drastically revised FMLA: paid leave under certain circumstances at 2/3rds pay plus the possible continuation of health insurance for a maximum of 12 weeks.
These are difficult times for both employers and employees. Unfortunately, the hope of survival may require strategic actions that are very unpleasant and difficult. All legal and economic exposures must be carefully reviewed, and there is little time to take such action.
Please speak with a Member of the Mandelbaum Barrett's Employment Law Department for further advice.