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COVID-19: Considerations for Retailers on Employee Furloughs in U.S. and California

As an alternative to laying off employees, many retailers may be considering furloughs – unpaid leaves or drastic reductions in work hours or work schedules – that allow them to retain employees and possibly continue to provide certain benefits. Retailers should be aware that furloughs still likely trigger notice requirements under state WARN laws, and in California may be considered a termination of employment requiring payment of final wages.

This post provides an overview of furlough considerations with respect to unemployment benefits, WARN laws, possible termination implications, reduced hours or work share, use of vacation time, and benefits.

Unemployment Insurance

Furloughed employees, as well as many employees with reduced hours, are eligible for unemployment insurance benefits. In California, Governor Newsom’s Executive Order N-25-20 removes the waiting period to receive benefits. More information on filing for unemployment benefits is available here.

WARN Laws

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with at least 100 employees who lay off at least 50 employees to provide advance notice of the “employment loss.” However, furloughs of less than 6 months do not qualify as an employment loss under the federal law.  At least 20 states have WARN laws, and the laws vary from state to state.

California’s WARN law, which applies to employers with 75 or more employees who lay off at least 50 employees, applies to furloughs exceeding a “de minimis” amount of time. The California Court of Appeal has held that a four- or five-week furlough

Retailers Can Maintain Drug Free Workplace Despite State Legalization of Marijuana

Many retailers wonder what effect, if any, legalization of recreational marijuana has on their ability to maintain a drug free workplace.

Recreational marijuana has been legalized in Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington. Marijuana still remains an illegal Schedule I substance under the federal Controlled Substances Act, and therefore still subject to prosecution under federal law.

Legalization of marijuana in the above states does not affect an employer’s ability to enact and enforce workplace restrictions related to drug possession, use, impairment, and testing. For example, California’s “Control, Regulate, and Tax Adult Use of Marijuana Act,” commonly referred to as Proposition 64, contains express language specifying that it does not:

  • affect the rights and obligations of public and private employers to maintain a drug and alcohol-free workplace;
  • require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace;
  • affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees; or
  • prevent employers from complying with state or federal law. (Cal. Health & Safety Code § 11362.45.)

Employers also maintain the right to enforce workplace restrictions on medical marijuana.  In 2008, the California Supreme Court held in Ross v. RagingWire Telecommunications, Inc. that an employer lawfully may enforce drug free workplace policies even if an employee uses the marijuana for medical purposes.   Proposition 64, does not limit the scope of that California Supreme Court holding.

Given the potential for confusion, employers

Retailers Prepare to Meet New Salary and Overtime Requirements

By now, most retailers and other employers have evaluated the impact, if any, that the new Department of Labor (DOL) regulations will have on their workforce beginning on December 1, 2016, when the minimum salary requirement for exempt status will increase to $913 per week ($47,476, annually). For many retailers, a portion of their workforce will now be classified as non-exempt workers and eligible for daily and/or weekly overtime compensation.   Implementation of the new rules, however, also requires careful consideration of the retailer’s payroll and timekeeping practices to ensure compliance with other state and federal laws that affect non-exempt employees.

Be mindful of “off the clock” work:

Reclassification of employees to hourly, non-exempt positions not only changes the way employees are paid, but also requires employees to think differently about how their work activities affect their pay. Employees, who previously were paid a salary regardless of the number of hours worked each pay period, must now track their actual working hours. Compensable work time may include a variety of work-related activities that occur before/after an employee’s regularly-scheduled shift. To avoid potential claims for unpaid “off the clock” work, retailers must be mindful that the following work activities may be considered compensable work time under federal and state law:

  • Checking and responding to emails and phone calls before/after work hours
  • Computer boot-up time
  • Pre-shift work (e.g., setting up retail store before a shift, loading or warming up trucks, transferring equipment or preparing a worksite)
  • Post-shift work (e.g., cleaning up a workstation or returning to
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