Insights

Brace for Impact: Four Types of Employment Claims After COVID-19

June 29, 2020

Claims/Coronavirus/Management Liability/D&O/Property & Casualty

By the time you read this, all 50 states will have reopened to one degree or another from the pandemic-fueled closures. Upwards of 40 million Americans find themselves unemployed. The environment facing employers is far different than the Great Recession in the late 2000s. A pandemic that has claimed nearly 100,000 lives at the time of writing, disrupted daily life and led to quarantine circumstances around the globe has also brought the economic climate close to a depression.

COVID-19 has delivered an unanticipated shock to the American workplace, leaving employers to make challenging choices under equally challenging economic and safety-related pressures. Employees nationwide are facing reduced compensation or outright unemployment, and in determining whether and when to return to their places of work, they must choose between either risking their job or their health.

Employers need to prepare for the types of claims they will deal with as restrictions are lifted and businesses resume. Here I will discuss the four types of employment claims you’ll face in the wake of the coronavirus.

The cautious optimism that comes with a gradual reopening is accompanied by a host of legal challenges and issues for which there is, as of yet, no clear guidance. Human resources and risk management professionals will have to strike a delicate balance between returning employees to some semblance of normal productivity and workplace safety.

The need for this balance is illustrated in potential spikes and surges that could be experienced in areas where stay-at-home guidance is being lifted to varying degrees.

In the midst of all that, new laws are being passed at a brisk rate on the national, state, and local level. Taken together, this all adds up to an environment ripe for waves of litigation brought individually, via mass or class action, on behalf of private litigants and agencies of all kinds.

Class actions have already arisen, with more certainly to come. Take, for example, lawsuits regarding:

We’re also seeing securities class actions in the biotech and pharmaceutical sectors alleging:

Such litigation will also increase in the employment arena. Let’s look at four potential areas that employers might anticipate litigation in the weeks and months ahead.

1. Discrimination

Certainly, there’s much to say about disability discrimination in the coronavirus age. I wrote at some length about it previously.

But there are other discrimination theories that will certainly see spikes in this environment. It’s important to note that these cases can cut across whole segments of worker populations, such that class or mass litigation activity is readily available.

Blaming a group of people defined by their race, ethnicity, or national origin in times of a pandemic isn’t exactly new. The Black Plague killed approximately one-third of Europe’s population, driving a rise in anti-Semitic activity.

Irish immigrants to this country in the 19th century were blamed for outbreaks of disease, including cholera. Regrettably, there are already reported incidents of comments directed at persons of Asian descent.

The Equal Employment Opportunity Commission issued a statement warning against the harassment or mistreatment of Asian employees in the workplace to address this concern.

For this and other forms of discrimination, it’s worth remembering that Title VII of the Civil Rights Act of 1964 bars discrimination in the workplace as pertaining to a number of traits.

It also applies to hiring, firing, promotions, benefits, the workplace in general, and how an employer responds to circumstances such as the current pandemic and economic crisis.

Likewise, the pandemic and the economic fallout it has brought puts employers into the difficult position of having to pay off, furlough, RIF, or terminate employees. In many instances, large swaths of them.

These employers may well have legitimate, non-pretextual reasons for such actions, and may regret having to part ways with valued workers, colleagues, and friends.

Nevertheless, in a crisis such as this, where neither capital nor time to truly study, plan and process an orderly downsize exists, a disproportionate impact on older workers (who are frequently high earners and therefore targets of such decisions) often results, as do claims of age discrimination that, on their face, can withstand summary adjudication.

Even in non-pandemic times, certain red flags surrounding layoff/RIF activity can be indicators that such activity may not withstand scrutiny. These red flags include:

  • The layoff is relatively small in scale and includes a disproportionately high number of older, highly compensated employees
  • Younger and less experienced employees are retained, and may even take over the older employees’ job functions
  • Comments, writings, and reviews reflect a bias or a preference to shedding older workers
  • Younger employees are hired within a short time after the layoff activity

2. Retaliation

Employees are now interested in PPE (personal protective equipment), changes that facilitate social distancing, cleanliness, safeguards, and other issues.

There have already been lawsuits around PPE in the workplace and COVID-19. This includes a class action against McDonald’s alleging the company did not provide safety measures for employees.

Not to mention that new liabilities around PPE may arise, such as heat illness for some workers that wear PPE to protect against COVID-19, and new regulations that remove fans from certain workplaces.

Increased employee demands for protection alongside the steps that employers may find necessary to take due to the economic crisis (i.e. layoffs, furloughs, etc.) will undoubtedly lead to retaliation and whistleblower claims as employees and plaintiff attorneys seek to link such demands to reductions in force, furloughs and the like.

Employees should be encouraged to raise concerns over workplace safety measures, and employers should ensure that avenues exist for them to do so without fear of retaliation. Clearly, employees shouldn’t be disciplined for doing so.

As with all things employment, clear, concise, and real-time documentation of any independent issues that might warrant discipline up to and including termination will be key to the employer’s ability to mount a credible defense.

3. Wage and Hour

The economic pressures we’ve been discussing are forcing companies to take steps they may not have contemplated in normal times, and certainly not with the haste and, potentially, lack of sufficient diligence as is happening now.

As a result, businesses are making payroll-centric decisions such as changes to scheduling, conversion of salaried employees to hourly, reductions in compensation (whether salaried or hourly), or layoff activity in a manner that could well provoke wage and hour litigation, including on a class and mass basis.

The Wage and Hour Division of the US Department of Labor has posted guidance on issues and risks arising in this area. These issues include the payment of wages and usage of PTO during the pandemic.

Work-at-home arrangements pose an additional challenge. If non-exempt workers perform their jobs during quarantine, the employer must ensure that it has methods in place to accurately track employee work time and compensate accordingly.

Likewise, non-exempt employees must accurately record their time and comply with all company policies relative to overtime approval, meal and rest breaks, and recording and reporting of business expenses. In times of shelter-at-home, these expenses can include extraordinary ones such as laptops and monitors, enhanced internet access, ergonomics, timekeeping/calendaring software, and other enhancements.

On the topic of working from home, it is now evident that companies will need to rethink the manner in which they measure productivity, how they create and apply job descriptions, discipline, promotions, compensation, and overhead expenses, including office space and lease arrangements.

The measure of success for corporate employers going forward may not necessarily involve the fanciest, most expensive office towers. Likewise, employees who once yearned for the corner office may communicate their wish for permanent work-at-home arrangements.

Certainly, corporate employers should be consulting with employment counsel for any and all payroll and workforce-wide decisions. The current crop of cases reflects the high stakes inherent in any payroll or layoff decision.

For example, corporations accepting relief under the CARES Act must be aware of the caveats attached, including, as noted in a recent class action, the commitment not to carry out any furloughs or involuntary layoffs.

4. Families First Coronavirus Relief Act (“FFCRA”)

This pandemic has resulted in a slew of new laws at the federal, state, and local levels. The FFCRA, enacted by Congress, includes the Emergency Family and Medical Leave Expansion Act (EFMLEA) and the Emergency Paid Sick Leave Act (EPSLA).

It requires employers with 500 or fewer employees to give employees expanded paid family and medical leave (EFML) and emergency paid sick leave (EPSL). Large employers should consult with employment counsel on the issue of layoffs or furloughs that reduce employee count to 500 or fewer and the application of FFCRA.

The EFMLEA expands upon leave protections found in the Family Medical Leave Act (FMLA), requiring employers to give employees 12 weeks of EFML (10 of those weeks paid) if the employee needs to provide care for a child under 18 due to school or care facility closures, or because a care provider is unavailable.

Employees only have to work at least 30 of the prior 60-day period to qualify and receive two-thirds of their pay, subject to caps.

The EPSLA requires employers to provide two weeks of paid sick leave to employees at one of two specified rates and has to be made available right away, regardless of how long the employee has worked for the employer.

The FFCRA provides the same remedies as the FMLA, and as such, an employee has a cause of action to recover damages such as lost wages, salary, benefits, and other compensation, or actual monetary losses resulting from the denial of leave—the costs of child care, by way of example, as well as liquidated damages, attorneys’ fees, and costs.

How Will Insurers Respond?

Employment practices liability insurance is key coverage for employment claims and it’s important to understand your EPL coverage now.

EPL premiums had been increasing over the last few years in employee-friendly states like California and New York. COVID-19 risks may lead to more widespread premium increases and coverage changes.

Upon seeing layoffs, furloughs, restructuring, bankruptcies, and contractions in revenue—not to mention the insurers encountering such issues themselves—carriers will likely apply stricter scrutiny to prospective clients’ going forward including financial viability as well as their loss and revenue histories.

Underwriters will likely dig into viability issues, and you can reasonably anticipate a number of pandemic questions during the process that may well slow things down, particularly for the hardest-hit industry sectors such as hospitality, restaurants, travel, and retail.

Involving outside counsel and invoking, where available and appropriate, the loss control service provided under EPL policies will be critical to navigating these uncertain times.

Whether you want to gain a better understanding of how the market might respond, how your coverage might respond, or how your employees might respond, please feel free to reach out to me and I’ll do all that I can to assist you.

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