The novel Coronavirus (“COVID-19”) that originated in Wuhan, China is a global pandemic. Nations have taken varying approaches towards slowing its spread (or “flattening the curve”) to allow overwhelmed healthcare systems an opportunity to catch up and gain a better understanding of how best to treat and, eventually, diminish the effects of COVID-19 since most agree that elimination isn’t possible and, like the flu, COVID-19 is here to stay. Common among all nations is the use of social distancing at a minimum and mandatory quarantine zones at an extreme to achieve this goal. While these methods, when adhered to by populations, have slowed the spread to manageable levels, the result is nothing short of a catastrophic blow to the world economy. We are all headed toward a severe recession – perhaps even a depression. For those that haven’t lost their jobs, furloughs (or “reduced compensation or leave without pay”) may be the new normal as unemployment and underemployment skyrocket while businesses and regulators try to come to terms with the current state of affairs.
In the U.S., Congress faces numerous ideological debates on how to protect businesses and consumers, jumpstart the economy once everything’s under control, avoid crippling levels of government debt, and move forward with proposals that have been in the pipeline for quite some time. Even with the passing of the Families First Coronavirus Relief Act (“FFCRA”), it’s all too clear that Congress (perhaps Federal Government as a whole) lacks a cohesive vision on how best to move forward based on the fights up to and since the FFCRA’s enactment. If they bail out businesses such as airlines, hospitality (including restaurants), and manufacturing without certain mandates, then there’s little reason to believe that these businesses won’t move forward with a reduced workforce or engage in stock buybacks as they’ve done in the past. Alternatively, if all you do is write a check to taxpayers, then they will likely hold onto the funds until spending it is absolutely necessary, which won’t jumpstart the economy by supporting consumption of business services. We were hoping that Congress would provide a well-developed relief package that balanced support between groups, but, unfortunately, it looks like we got what they thought would have to suffice for now since Treasury is already seeking an additional $250 billion fund. That said, a bipartisan call for employee rights and protections is likely a major factor in any future funding package and may even lead to future legislative overhauls of antiquated policies and regulations.
Employee rights and protections come in many forms such as wages, hiring practices, employment retention, accrued annual leave, and discrimination to name a few. As a byproduct of COVID-19, those related to employment retention, wages and accrued annual leave are taking centerstage. Many on Congress’ Democratic side fear that the FFCRA’s bailout of large and small businesses didn’t go far enough with prohibitions on stock buybacks, layoffs, etc., and will do little for the economy as a whole and employees in particular. At the state level, many are grappling with employee rights for those that are furloughed or laid off, with only 15 states requiring a payout of accrued annual leave upon separation – though seven of these states provide caveats to this requirement such as having a forfeiture policy in place (PATRIOT: state-specific policies). Additionally, use of accrued annual leave – even among large businesses – lack many guidelines and tend to fall upon the discretionary approval of the business (i.e., owner or executive leadership) that may restrict the use of accrued annual leave during furloughs.
Given the level of focus on these employee rights and protections issues by Congress at the Federal level and the Department of Labor at the Federal and state level, it stands to reason that these policies will be addressed in the very short-term and businesses of all shapes and sizes will need to plan accordingly. We recommend owners and operators maintain communication with general counsel and human resource specialists to ensure corporate policies and procedures align with the coming regulatory guidance.