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Legal Obligations & Protections for Employers in the Age of COVID-19

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As the government continues to take unprecedented steps to control the spread of the coronavirus, a topic that has generated a great deal of public debate is – What exactly constitutes an essential business and how is it different from those classified as non-essential?

Understanding this is important when it comes to defining the legal obligations and protections for employers during the COVID-19 crisis, in light of the social distancing rules and the shelter-in-place rules that are currently in force. Here’s what you need to know.

What Is an Essential Business

Several states across the US have issued orders that require only certain businesses to remain open to curb the spread of the pandemic and flatten the curve with regards to the number of new infections.

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Health care providers, transportation services, gas stations, grocery stores, hardware stores, and banks are all universally accepted as essential services. This means that they can still operate despite the shelter-in-place mandates in force.

The government may also allow businesses that provide essential support to workers of essential businesses to report to work. San Francisco, for instance, ordered that daycares remain operational to allow parents who work for entities in the essential industries, to report to work and carry out their duties effectively.

Nonetheless, these businesses still have to comply with the public health protocols in place, like sanitization, providing the necessary personal protective equipment to employees, and implementing social distancing.

What Is a Non-Essential Business

These are typically those businesses geared towards entertainment and recreation like shopping malls, sports and concert venues, theaters, and gyms. Dine-in restaurants are technically non-essential, although many cities have allowed them to remain operational but mainly for deliveries and take-out.

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Generally, non-essential businesses that are capable of conducting their day-to-day operations remotely have been encouraged to do so and asked to take the necessary steps to ensure that their employees are properly equipped to work from home.

Legal Obligations for Employers

Non-essential businesses risk facing heavy fines and penalties for not complying with the government-issued health directives. In some states like Arizona, the violation of the business-closure orders is considered a Class 1 misdemeanor, which carries a fine of up to $20,000 or a maximum of six months behind bars.

It is therefore important for employers to comply with both the new and pre-existing directives to avoid being on the wrong side of the law. Here are a few things you need to consider in light of the COVID-19 crisis.


The coronavirus pandemic has no doubt lent a devastating blow to several enterprises in different sectors across the country. If you’re an employer whose business is struggling to remain afloat, you may be left with no choice but to layoff, furlough, or terminate a large number of your employees.

According to the existing employment law in several states, an employer is within their rights to terminate an employment contract for any reason provided that it isn’t illegal or in direct contravention of the terms of the contract. This means that you don’t have to worry about getting sued for wrongful termination if you had to let go of your employees.

On the other hand, if you’re running a non-essential business and choose to defiantly remain open despite the current government directive, you risk a lawsuit if you fire an employee who refuses to come into work.

Furlough vs. Layoff

A work furlough and layoff generally mean the same thing. The difference comes in when you consider the duration of each.

The term “furlough” means suspending an employee from work without pay for a fixed period. It is a temporary measure taken by companies when they can’t afford to pay them.

The term “layoff,” on the other hand, refers to an indefinite and often permanent break from employment. Furloughed workers remain in your company books as employees, whereas laid-off workers don’t.

Discrimination and Harassment

You may also get sued by your employees for discrimination or adverse treatment based on certain characteristics that have recently been identified by local, state, and federal laws. Hate crime against individuals with Asian descent, for instance, has been on the rise since the outbreak of the pandemic.

They are unfairly targeted by people who mistakenly believe that they are solely responsible for the creation and spread of the coronavirus disease. If you are an employer with Asian or Asian-American employees, you are responsible for ensuring that they are protected from any form of discrimination. Failure to do this may open you up to a lawsuit.

Fair Labor Standards Act

Despite the current state of affairs, you still need to comply with the wage and hour laws under the Fair Labor Standards Act (FLSA) that provide guidelines for paying your employees.

If they are non-exempt as per the FLSA requirements, then you technically don’t need to pay them. But, if you have the financial ability to continue paying your non-working staff, this goodwill gesture is a great way to bolster morale.

Remote Work

With the shelter-in-place directives from the government, many businesses have been forced to transition to remote work. As an employer, you’ll need to set up clear policies that detail your expectations.

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You’ll also need to provide your staff with the equipment they need to be able to work from home, as well as guidelines on when and where they can work. You can also limit certain employees to work remotely and require others to come into work if your office is legally permitted to remain open.

If an employee refuses to come to work, although your business premises are legally open, then you can terminate their employment contract without running the risk of facing a wrongful termination lawsuit.

OSHA Compliance

The Occupational Safety and Health Administration (OSHA) has issued guidelines designed to sensitize employers on the levels of risk associated with contracting COVID-19 in different types of workplaces.

OSHA regulations require employers to plan their emergency response if any of their employees gets exposed to the coronavirus. Some of the notable OSHA requirements include:

  • Making it mandatory for your employees to inform their respective supervisors if they exhibit symptoms of or test positive for the virus
  • Taking your employees’ temperatures and sending them home if they exhibit any of the symptoms associated with COVID-19
  • Sending home employees who you suspect to have the virus and any other individuals who may have interacted with them in any meaningful way in the preceding 14 days
  • Closing off and thoroughly cleaning any areas of your office that the affected employees may have used within that time-frame

Small Business Insurance

Many insurance policies offer business interruption coverage. Business owners in the country and other parts of the world can all attest to the fact that the COVID-19 pandemic has seriously hurt their business operations.

The real question is – will insurers honor business interruption claims?

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What Does Business Insurance Cover

Business interruption insurance is typically combined with property insurance. In the wording of most policy documents, the cover is triggered when a business is interrupted as the direct result of physical damage to the insured’s property at the business premises. Here are some of the key aspects of the cover you need to be aware of as an employer.

Physical Damage

The raging debate revolves around whether the presence of the coronavirus on an insured property constitutes “physical damage.” Even more disconcerting is the fact that insurance policy documents hardly ever define what “physical damage” means.

In many common law cases, contamination has been equated to physical damage when:

a) The damage is temporary
b) The damage is reversible

The actual presence of people in your work premises who have been exposed to the coronavirus alone is insufficient to trigger the cover since it’s not the physical property itself that is contaminated.

Ensure that you examine the wordings of your policy carefully to determine what may fall under business interruption insurance exclusions. Some policies exclude contamination resulting from viruses, bacteria, etc. which would rule out COVID-19 entirely.

How Does Business Interruption Insurance Work for Non-Damage Claims

If your insurance cover contains a clause extension for non-damage interruption resulting from infectious diseases, then it is more likely to be triggered in the present circumstances. These types of extensions can take different forms.

Some list specific types of infectious diseases and cover business interruption claims that result from restrictions on the use of the affected premises on the advice or order of a competent authority. In reality, however, given the timing of the pandemic, it is unlikely that the existing active policies cover COVID-19.

Other forms may provide cover for the closure of part or all of the insured’s premises on the advice or order of a competent authority due to the outbreak of a “legally notifiable” human infectious disease. In certain jurisdictions, if the business interruption occurs before the disease becomes “legally notifiable,” which is often in the form of a specific order, the disease is not covered.

To know where your business stands, start by requesting a complete copy of your policy document and check if it covers the following:

  • Business interruption
  • Contingent business interruptions
  • Civil authority
  • Contingent extra expense
  • Extended indemnity period
  • Ingress/Egress
  • Ordinary payroll

Pay attention to the wordings used for each to see whether the current coronavirus crisis can trigger coverage in the above-listed categories. Several cases will receive compensation, and several others will be denied coverage. The bottom line is – both businesses and insurers are all trying to navigate uncharted waters.

Workers Compensation Benefits

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Is COVID-19 covered under workers’ compensation? This is a common question posed by both employers and employees alike. Ideally, workers’ compensation benefits for occupational diseases are triggered when employees contract diseases in their line of work in jobs that put them at a higher risk for infection than the general population.

For instance, healthcare workers and first responders who contract COVID-19 from infected patients can receive workers’ comp. However, if your business lies outside of the healthcare industry and your employees don’t particularly face an elevated risk of contracting the coronavirus in their line of work, then it might be difficult for them to prove that their infection occurred while on the job.

If you’re not quite sure where your business stands with regards to the level of risk exposure your employees face in their work-related activities during this crisis period, workers’ compensation lawyers will help shed some light on your concerns.

COVID-19 FMLA and Paid Sick Leave

On March 18, 2020, the Families First Coronavirus Response Act was enacted. The law, which went into effect on April 1, 2020, does three main things:

  1. It expands the Family and Medical Leave Act (FMLA) to include leave and loss of income when your employees need to care for their children due to the closure of schools and child care facilities as a result of the COVID-19 pandemic
  1. It creates two weeks of paid FMLA leave for employees for reasons directly related to the coronavirus situation or for childcare
  1. It provides for tax credits for paid leave set out by the FMLA

These new laws, however, only apply to governmental agencies and private employers with less than 500 employees.

To know whether they apply to you, add the number of employees you have who receive a W-2, as well as any persons providing services or labor to your business even if they are being paid by another company. This number also includes temporary or leased employees and day laborers.

Stay Up-To-Date with the Latest COVID-19 Legislation

The coronavirus has brought with it new challenges for employers, many of whom may be uncertain about the steps they need to take to comply with both the new and pre-existing laws in the country. Stay up-to-date on any new legislation or regulation that goes into effect and understand the potential impact it may have on your business.

If you have any legal questions concerning your legal obligations and protections as an employer, feel free to chat online with a attorney. You’ll be instantly connected to a lawyer who can give you legal guidance on your specific case or question.

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