Are Overtime Rules Enforceable?

And other concerns for safeguarding businesses from legal risk during and after the COVID-19 pandemic

by Robert S. Reder

Seven months into 2020 and the COVID-19 pandemic has changed nearly every aspect of life. Even mundane matters like working out has changed (you now need a gym reservation). Working at home, remote learning, social distancing and mask mandates are only the surface of what challenges face our personal and professional lives this year and beyond. This article offers some basic, practical employment law and business guidance to help owners navigate this new reality.

Employment Policies Update

While some businesses find that employees remain productive working from home and have added a remote work option, other businesses now require that their employees return to the office. Regardless of whether employees are at home or in office, employers would be wise to update their employment policies, which, it is to be hoped, are set forth in a formal employee handbook.

The main concern must be the health and productivity of the employees, without which a business will suffer. So, it is important to either update the handbook (or create a supplement to that handbook) with CDC- and OSHA-compliant policies that mitigate the spread of COVID-19 in the office. If a company is large enough, its business leaders should consider staggering employee work schedules to ensure that employees in the office can properly socially distance. Having PPE supplies available in the office is also a good idea — hand sanitizer, single-use masks and disposable gloves are some suggestions. Also, it’s important that businesses have posted in an area of the business which all employees may access both the required employment law posters and the poster supplements issued by the CDC and OSHA (available directly from the CDC and OSHA websites).

Regarding work-from-home employees, businesses may hold those employees to the same standard as their in-office employees. During business hours, employees must still comply with applicable company policies. Employees must also be as available and responsive as they would be in the office, and employers can implement systems (such as a software monitoring program) to ensure employees are working. Employers may also require a negative COVID-19 test as a predicate to an employee returning to work. But employers need to be aware and take care: The Equal Employment Opportunity Commission’s guidance on which type of test is appropriate under the regulations has changed several times since the start of the pandemic. Typically, current EEOC guidance is available on its website; there is no need to hire a lawyer to answer every legal question. Of course, businesses should notify all employees in writing of any policy changes. 

Finally, while Arizona has no specific overtime law, the Fair Labor Standards Act requires that “covered employees” working for “covered employers” be paid time and a half for every hour more than 40 worked in a single week. Unless an employee falls within an exemption to the FLSA — of which there are many — employers must still pay overtime. But, presuming the employer has a policy that an employee must obtain supervisor approval before working overtime, if the employee violates that policy the company may pay the overtime and terminate the employee (or at least provide a written warning). Employers need to remember that, even if the hours an employee has worked were not authorized, the employer must still pay the employee for that time worked.

Insurance Audit

Concerning insurance, businesses should contact an insurance agent to, at a minimum, review any workers’ compensation, commercial liability, cyber liability and business interruption policies to determine if those coverages apply to pandemics, employees working from home, loss of revenue, and the like. Many business insurance policies have exclusions specifying there is no coverage for losses related to employee work-from-home claims, so all businesses who have employees working from home should review both the coverage terms and the exclusions of any policy. 

Our law firm just completed this process where we looked at the following coverages: workers’ compensation, general commercial liability, employment practices liability and cyber liability. This audit determined that our specific policies do cover employees working from home (other than with respect to employee injuries at home, which are excluded from the commercial liability coverage but not the workers’ compensation policy). Policies, of course, may differ depending on the carrier.

Another key policy to look at while examining insurance coverage is business interruption coverage. During the height of COVID-19-mandated shutdowns, many insurance claims were denied by the carrier as an “act of God” or “force majeure.” Many policies include these provisions, which generally state that “acts of God” such as a viral pandemic excuse contractual performance, such as a loss payout under a policy arising from a pandemic. Each business should review all policies to be aware of any coverage gaps and, where possible, shore up those gaps.  

Robert S. Reder is the managing partner of Blythe Grace PLLC. For more than 15 years, Reder has represented individuals, small businesses and large companies located in Arizona and nationwide. In his litigation and dispute resolution practices, he has represented clients in cases ranging from small breach of contract actions to complex commercial disputes.

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