Many veterinarians and health care providers are asking us about their legal obligations to employees should they close their offices due to COVID-19. As you read through, please note that this Q&A does not address any specific federal or state emergency unemployment compensation pay benefits, because as of today [March 17], no such legislation has been finalized.
Am I required to pay my employees if I voluntarily close my office or I am ultimately ordered by the government to do so?
No. Except for possible requirements under any employment agreements, as addressed below, you are not required to pay your employees whether you decide to voluntarily close your office or are ordered by the government to do so.
Can I give my employees salary advances?
Yes, as a general proposition, you can give salary advances. However, many states have laws regulating employers doing so. In some states there are employment, wage and hour, and consumer lending laws which may be applicable. (Depending on the number of times a veterinary practice gives employee salary advances, federal consumer lending laws may also apply.)
In general, the veterinary practice must have a written agreement with the employee on the terms of the salary advance including, obviously:
- The amount of the advance.
- Whether any interest will be charged.
- When the employee must begin repaying the advance.
- Over how many pay periods will the advance be repaid.
- The dollar amount which will be deducted from each of the employee’s paychecks until the advance is repaid. (The repayment of the advance is accomplished through a deduction from these future employee paychecks.)
One last point is that federal and state income tax and payroll benefit taxes (Social Security, Medicare, unemployed compensation fund taxes and the like) must be deducted from the salary advance. We suggest that you work with your payroll company or accountant on making any salary advances.
Am I required to permit my employees to use vacation, sick leave, personal time or other paid time off if I voluntarily close my office or I am ordered by the government to do so?
As discussed below, these employees are technically on temporary layoff. Therefore, they generally are not entitled to be paid for unused PTO or accrued sick or vacation time and, depending on any written policies you have and any paid sick leave laws in the states where you work, they may or may not be entitled to continue to accrue those benefits while on temporary layoff.
Unless they have contracted the virus or are otherwise sick, they are not entitled to take paid sick leave. They are not taking time off for personal business, unless to care for children, due to school closings, or a sick or elderly family member.
If an employee does try to take vacation time, the practice has the inherent managerial right to deny the request, even if it does not have a personnel policy which specially advises employees of this right. However, in some states the employer does have to pay the employee for any unused vacation or other paid time off when the employee leaves.
Nevertheless, if it is at all financially possible for the practice, we recommend, as a proper HR policy, that it permit its employees, including those who do not fit any of the situations described above, to use any paid time off they have while your practice is closed during this emergency. (As discussed below, depending on the laws in your state, employees may be entitled to paid sick leave or other paid time off mandated by state law.)
What if all my employees ask to take all their paid sick leave, required by state law, and I cannot afford to pay it all now?
This question is obviously only applicable in those states which have laws requiring employers to provide paid sick leave for their employees. First, it is very important to check your specific state law regarding when an employee is entitled to paid sick leave, in order to determine on an employee-by-employee basis whether they are entitled to this paid leave.
For example, in California, employees are entitled to use the state required paid sick leave only if they or an immediate family member is ill due to the coronavirus or otherwise. (There are other situations when California employees can use this leave which are not relevant to the current emergency.) Consequently, if COVID-19 is successfully contained in California, there will be fairly limited situations in which employees will be immediately entitled to use all their accrued paid sick leave.
However, in contrast, the New Jersey paid sick leave law permits employees to take this leave in the same two situations as in California, but also when their employer‘s business is closed due to a public health emergency or their children’s school or day care is closed due to a similar emergency. In effect then, all employees in New Jersey who have children home due to school or day care closings in this emergency are now entitled to use all the paid sick leave they have accrued. If there is a government ordered closing of all but essential businesses in New Jersey, then nearly all employees will be entitled to now use all of their paid sick leave.
For those employers who do not have sufficient cash in their business bank accounts to pay all this sick leave, we suggest taking the following steps:
- Calculate how much of a cash reserve you need to pay essential operating costs to stay in business, and what projected income you still expect to receive over the short term (e.g.; the next two months).
- Calculate how much remaining cash on hand and projected income you will have to pay those employees who request paid sick leave. (You do not have to offer it; employees have to request it.)
- Keep records and provide them to these employees of the time and dollar amounts you have paid them now and what you owe them, and let them know that you will pay them what you owe as soon as you can. Remember, all sick leave is paid through regular payroll with all deductions and withholding.
If you decide to remain open, under what circumstances can employees stay home?
If they are sick with the coronavirus or otherwise, they may be entitled to paid sick leave depending on your policies and state law. Whether or not the absence is paid, you should have a policy requiring employees to remain home if they don’t feel well or suspect that they may be contagious.
Similarly, they may be entitled to stay home to care for a family member or a child who is home due to his or her school closing, or due to their family member being sick with the coronavirus or being contagious.
If it is financially possible for the practice, we recommend, as a proper HR policy, that it permit its employees, including those who do not fit any of the situations described above, to use any paid time off they have while your practice is closed during this emergency. (As discussed below, depending on the laws in your state, employees may be entitled to paid sick leave or other paid time off mandated by state law.)
What procedures should the practice follow with its employees in closing the office?
We recommend documenting, at least to some extent, the patient cancellations and then provide employees with a written notice that they are being temporarily laid off due to “lack of work” because of patient cancellations.
What should I tell employees about the length of the temporary layoff?
We have no idea how long this situation will last, particularly if we have a complete shutdown on a local, state-by-state or national level. Consequently, in any written notice of layoff we recommend advising employees that this temporary layoff is for an indefinite period of time and the practice will give them as much advance notice as possible of the date when the practice will be reopening.
Should I advise my employees to apply for unemployment compensation benefits?
Yes. Following the above recommended procedures for temporary layoff, your employees may qualify for unemployment compensation benefits because they are being temporarily laid off due to “lack of work.”
However, we recommend advising employees that this decision will be made by your state department of labor. It is not a decision made by your practice, and you cannot make any representations to your employees that they will qualify for unemployment benefits. We also recommend advising your employees that if they do use any paid time off, it may disqualify them from unemployment compensation benefits for the period of time they are being paid by your practice.
Will there be a cost to my practice for employees receiving unemployment compensation?
It varies from state to state how employer tax contributions to the state‘s unemployment compensation plan are calculated. With essentially all the practice employees applying for unemployment benefits, and depending on the length of the benefit payments, it is possible that the practice’s tax contributions (its experience rating) will increase. It is also possible that the practice will not experience this increase until 2021. Again, this depends on the plan in your state.
Do I deal differently with my professional staff and my support staff?
As a general proposition the answer is “no.” Except to the extent your professional staff has employment agreements, then you need to comply with the terms of those agreements with regard to terminations, layoffs, the use of vacation, sick and personal time or other paid time off. You also need to review these employment agreements to determine if they include any provisions requiring payment of salary during a required notice period, or payment of severance as part of or prior to any cessation of employment.
We also recommend that, if you are not terminating someone with a written employment agreement, you clarify with your professional staff that these employment agreements are not being terminated; they are simply being temporarily laid off for the duration of the emergency.
Is my practice obligated to continue paying for health insurance during this temporary layoff?
If your practice has the equivalent of 20 or more full-time employees, then it is covered by a federal law known as COBRA for the continuation of health insurance when employees cease actively working. If the practice has less than this number of employees, then it may be covered by any state law, if your state has one, which, like COBRA, addresses the continuing of health insurance for employees when they cease actively working. Under either COBRA or a comparable state law (if your state has one), an employer is required to continue an employee’s health insurance during a temporary layoff.
Most employers require employee contributions to health insurance premiums with the employer paying the balance of the premiums. During this temporary layoff, the employer can require that the employee pay the entire premium. However, if the temporary layoff is for less than a month, or even for a full month, and because premiums are paid on a monthly basis, it may be impractical for such a short time to change the contribution scheme to the employee paying all the premiums and then revert back to this employer/employee split of premium payments. Best to check with the practice’s insurance broker on this point.
A practice may adopt a policy that it will pay its portion of the premium for the first month of a temporary layoff, and then the employee has to pay the full premium if the layoff continues into a second month. Although the practice is free to continue to pay its portion of the premium for a longer period if it chooses. In addition, if during this temporary layoff, the employee is on federal family and medical leave, or is on leave under a comparable state law, then the practice will have to continue paying its portion of the health insurance premiums during this layoff.
Are there any other state or federal benefits to which my employees may be entitled during this temporary closure?
There is the federal Family and Medical Leave Act, which only applies to employers with 50 or more employees within a 75-mile radius and within 20 weeks in the preceding year. The employee must also have worked for the company for at least 12 months and have worked at least 1,250 hours.
Some states have similar laws for employers with less than this number of employees. For example, the New Jersey Family Leave Act was recently reduced to employers with 30 or more employees. A few states also have laws mandating any one or more of the following benefits: paid sick leave, paid family leave, paid employee temporary disability leave, and even paid family temporary disability leave.
These state laws vary widely from state to state, and many states have none of them. For those practices with less than 50 employees, we suggest you advise employees to check their state department of labor website to determine their eligibility for any state benefits. For those veterinary practices which have 50 or more employees, we recommend advising employees to also check the federal Department of Labor website for this same purpose.
What should my practice do if we decide to stay open?
We recommend that you check the U.S. Centers for Disease Control and Prevention website for health safety protocols as well as other applicable federal and state agency websites and the Americans with Disabilities Act website.
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