Editor's Note: The following is a guest post from Roscoe Green and Benjamin Briggs, partners at Cotney Construction Law. The information contained in this article is for general educational information only and does not intend to constitute legal advice nor should be relied upon as legal advice.
As the number of contractors faced with a project suspension continues to mount, we, [the partners at Cotney Construction Law], have been fielding one increasingly common question from contractors around the county: “Am I obligated to pay my employees for time off during a COVID-19-related suspension?” In part three of this series, we tackle this common question that contractors are asking with regard to suspended projects.
The quick answer is that contractors are generally not required to pay employees for time off during a project suspension, but it may depend on the specific circumstances.
The more detailed answer to this question involves an intersection of long-existing wage and hour laws, new paid leave laws that went into effect at the beginning of April, and your company’s employee contracts or policies relating to paid time off (PTO).
As an initial matter, federal wage and hour law does not require employers to pay employees who are not actually working, or “on the clock.” Federal law requires contractors to compensate employees for all of their work time, but that obligation ends when the employee stops working. So, if a project suspension (or any other business reason) has caused you to send your workers home until further notice, federal wage and hour law does not require you to pay those workers during their time off. Note, though, that state or local wage laws are often substantively consistent with federal law, but remember to review any applicable state or local law when evaluating your obligation to pay employees.
Federal leave laws
While federal wage and hour law does not require contractors to pay employees during time off from work, the new federal leave laws do require paid leave under limited circumstances. Specifically, the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act collectively require covered employers to provide paid leave to employees for six specific COVID-19-related reasons.
The six qualifying reasons for paid leave include instances in which a healthcare provider advises the employee to self-quarantine or in which the employee needs leave to care for a child whose school or childcare is closed, for example. However, for the purposes of this article, it is not necessary to analyze the six qualifying reasons for paid leave under the new federal laws because none of those six reasons apply if the contractor does not have work available for the employee to perform.
In other words, these new federal leave laws do not require a contractor to provide paid leave to its employees if the contractor does not have work available for the employees due to a project suspension. This is true even if the project suspension was directly or indirectly caused by COVID-19 or the precautions taken to combat the virus.
Ultimately, the new leave laws require covered contractors to provide paid leave to an employee who is unable to work due to one of the six qualifying COVID-19 reasons; but if the contractor does not have work available for the employee, then the employee’s inability to work is not due to one of the six qualifying COVID-19 reasons but instead is due to the business reality that there is no work available.
Paid time off
Finally, even if contractors are not required to pay their employees for time off under wage and hour laws or the new federal leave laws — which will generally be true in the case of a project suspension — contractors may still be obligated to pay those employees under any existing employment contract or PTO policy they have with their employees. For instance, if your company provides PTO to certain employees, those employees may be entitled to use any accrued PTO while they are on leave in accordance with the terms of the company’s PTO policy.
Thus, it is important for contractors to review the terms of any PTO policy, employment contract, or collective bargaining agreement to determine if such an agreement requires the contractor to pay an employee during a project suspension.
As an aside, contractors should keep in mind that employees who do not have work available and are not receiving paid leave may be eligible for unemployment under the relevant state unemployment program. Again, it is likely the suspension will result in a claim by the contractor for additional time and costs incurred as a result.
Contractors should not forget to review the language of their contract, as these and other additional costs incurred (e.g., standby/idle labor costs) are costs the contractor may be able to recover by including them in a proper suspension claim.
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