Wage and Hour Roundup: Using “Relief” Workers During the COVID-19 Crisis

As COVID-19 continues to remain a critical issue across the country, an increasing number of employers that are allowed to remain open despite shelter-in-place orders may be experiencing staffing shortages. This is because employees may be increasingly absent due to mandatory or voluntary quarantines. To maintain operations, many of these employers are turning to areas of their businesses or enterprises that may have a staffing surplus, and temporarily reassigning those employees to the more essential roles vacated by employees who are absent as a result of the COVID-19 crisis.

While it is generally permissible to reassign at-will employees as needed, there can be unintended wage and hour consequences of doing so. Below are answers to a number of frequently asked wage and hour questions presented by the use of reassigned workers.

Question 1. Can employers assign exempt office staff to perform non-exempt factory or production duties?

Yes, but with caution. Generally speaking, the Fair Labor Standards Act (FLSA) requires exempt employees to be primarily engaged in exempt work. To be a primary duty, the work must be the “principal, main, major or most important duty that the employee performs.” Strict percentages are not required under the FLSA, but employees who spend more than 50 percent of their workweek performing exempt work will generally satisfy the primary duty requirement This becomes problematic when exempt workers also perform separate non-exempt jobs in the same workweek. The more non-exempt work performed, the less primary the exempt work becomes in that workweek. That increases the risk of a misclassification claim and the obligation to pay overtime compensation for the workweeks in question.

The regulations implementing the FLSA contemplate emergency scenarios in which an exempt employee working in the private sector can temporarily perform non-exempt work without jeopardizing his or her exempt status. For example, the regulations state that “[r]eplacing a nonexempt employee during the first day or partial day of an illness may be considered exempt emergency work depending on factors such as the size of the establishment and of the executive’s department, the nature of the industry, the consequences that would flow from the failure to replace the ailing employee immediately, and the feasibility of filling the employee’s place promptly.”

While the foregoing regulations may provide some justification for reassigning exempt workers to non-exempt jobs, it may be best to limit the non-exempt time to no more than 50 percent of their workweek. If an exempt employee will be spending more than 50 percent of his or her time performing non-exempt duties, the employer might consider reclassifying the employee to non-exempt on temporary basis. It is important to note that state laws can differ on the amount of time an employee needs to spend on exempt duties before that employee can be properly classified as exempt from overtime. If possible, limiting the maximum total workweek of relief workers to 40 hours may minimize or eliminate the concern of unpaid overtime. Unlike the salary basis test, which can affect all exempt workers in the same classification, the job duties test only affects workers on an individual basis.

Question 2. Can employers provide additional pay to exempt workers when they perform non-exempt relief work in addition to their regularly scheduled exempt work?

Yes. An employer can provide additional pay to workers in this scenario, but it is not required to do so. Assuming the worker remains primarily engaged in exempt work, and therefore is not entitled to overtime, the salary basis test only requires that the worker receives his or her weekly guaranteed salary (at least $684/workweek), without regard to the quantity or quality of the work performed. So, more work does not necessarily equal more pay.

If an exempt worker receives his or her minimum guaranteed salary, the FLSA allows employers to pay additional compensation to the employee for performing extra or irregular work, without jeopardizing his or her exempt status. Under the FLSA regulations, the additional compensation may be “paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off.”

Question 3. Can an employer assign non-exempt workers from one of its businesses that is experiencing a staffing surplus to work in another business that is experiencing a staffing shortage?

Yes, but this scenario could implicate joint-employment rules and require the employer to aggregate hours worked by that employee at both businesses during the workweek for purposes of overtime. According to the U.S. Department of Labor (DOL), two employers will generally be sufficiently associated, and therefore joint employers, when:

• “There is an arrangement between them to share the employee’s services”;
• “One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or”
• “They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

To illustrate, the DOL provides the following example:

An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate.

Are the restaurant establishments joint employers of the cook?

Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with respect to the cook’s employment, they must aggregate the cook’s hours worked across the two restaurants for purposes of complying with the Act.

Question 4. How should an employer calculate overtime compensation for non-exempt employees who perform work in two or more positions with different rates of pay in a workweek?

All hours worked by the non-exempt employee in the workweek must be aggregated to determine if the maximum hours threshold has been met. If so, and the jobs have different rates of pay, the default rule under the FLSA requires payment of overtime at the rate of 1.5 times the weighted average of the rates involved. For example, an employee who works 40 hours at $15 per hour in one job, and an additional 10 hours at $12 per hour in a second job, would have a blended rate of $14.40 [($15 x 40 hours) + ($12 x 10 hours) = $720 ÷ 50 hours = $14.40] . The rate would be higher if the employee earned additional compensation during the workweek.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Critical information for employers is also available via the firm’s webinar programs.