Does COVID-19 Affect Federal Overtime Law?

The COVID-19 pandemic has led to extraordinary changes in the American economy. Some of them are ongoing. Some may last for a while or be permanent. But the fact remains that American businesses have been interrupted in a way not seen since World War Two. Now that businesses are reopening, it’s time to survey the legal carnage left behind by this historic series of events.

Federal overtime law under the Fair Labor Standards Act (“FLSA”) is one area that’s sure to draw attention. The general rule under federal overtime law is that employees must be paid overtime for any working hours over forty in a given week, unless they qualify for one of the FLSA’s many exemptions from its overtime coverage. An upcoming issue will be whether the workforce disruption caused by the COVID-19 pandemic also disrupts employees’ FLSA overtime rights.

Many employers have seen their workforces drastically affected during the pandemic. Some have been forced to lay off employees because of financial considerations. Others have had their workforces reduced while parents stay home with children or sick dependents or stay home because they are were sick themselves. That in turn has caused employers to reassign their remaining employees to cover the workforce gaps. An FLSA overtime issue may arise if employers temporarily assign exempt employees to do perform nonexempt work. It’s possible that that exempt employees temporarily performing nonexempt lose their exempt status and are eligible for overtime should they work sufficient hours.

Under this scenario, an overtime rule issued by the United States Department of Labor will be very important. The DOL’s responsible for interpreting and implementing the FLSA’s overtime provisions. One of its rules is 29 C.F.R § 541.706. That rule offers guidance for emergency work assignment decisions that require exempt employees to perform nonexempt work. Under 29 C.F.R § 541.706, an exempt employee will not lose exempt status by performing nonexempt work because of an emergency. Thus, any work performed by exempt employees during an emergency is considered exempt work. In that situation, exempt employees don’t lose their exempt status and aren’t entitled to overtime, even though they’re temporarily performing nonexempt work.

Whether an employer’s pandemic-related situation qualifies as an “emergency” under 29 C.F.R § 541.706 is a difficult question that’ll require case-by-case analysis. The DOL doesn’t offer much help in the rule itself. Emergencies are defined as circumstances beyond an employer’s control, for which they cannot reasonably provide in the normal course of business. They are primarily rare conditions that employers cannot realistically anticipate. The DOL suggests that the rule is intended to provide flexibility and account for real emergencies. Examples of emergencies include strikes resulting in the reduced availability of labor to continue operations and a mine explosion requiring exempt employees to immediately assist in digging out trapped workers. Alternatively, heavy work periods, rush orders, and times during which necessary equipment needs routine repair do not qualify as emergencies.

The need for an individualized inquiry into each business’s situation is apparent from those factors. The employer has to prove that its situation was completely beyond its control, unanticipated, and not reasonably provided for in the normal course of business. At the same time, businesses that simply became unusually busy because of increased demand for an important product, such as masks or ventilators, likely cannot claim an “emergency” and avoid overtime obligations if they require exempt employees to perform nonexempt work.