In a previous article, we discussed the various ways the coronavirus may impact Minnesota businesses. The potential economic impact of COVID-19 came into sharp focus on March 26, 2020, when Governor Walz issued Executive Order 20-20. This order requires “all persons currently living in Minnesota” to stay at their home or residence, with some exception for essential personnel and services. The order goes into effect today (March 27, 2020) at 11:59 p.m. and violators may be criminally charged with a misdemeanor. 

Employers operating in Minnesota will need to consider the following issues when grappling with the coronavirus pandemic and the Executive Orders intended to slow its spread

Scope

Executive Order 20-20 contains numerous exceptions for certain businesses, such as critical manufacturing, health services, some construction trades, grocery stores, and others. These exceptions are drawn from, and further clarified by, the Department of Homeland Security’s CISA guidance (which is attached to Executive Order 20-20). The exceptions often contain general terms, however, and many businesses may fall into a “gray area.” Our attorneys can provide clarity to employers who are unsure whether their operations are considered essential services and thus excepted from the mandated quarantine. 

Unemployment

An employee may collect unemployment benefits even if the employee is furloughed, i.e. temporarily unemployed for limited yet indefinite length of time. Traditionally, a furloughed employee would only be eligible for unemployment benefits after the first week without pay. That changed on March 16, 2020, when Governor Walz issued Executive Order 20-05, which removed this requirement and allowed furloughed employees to seek unemployment immediately.

Minnesota assesses unemployment taxes for a business based on the amount of unemployment benefits paid to former employees. Unemployment has spiked in the recent week due to the coronavirus and those figures are likely to rise with Executive Order 20-20. Fortunately for Minnesota employers, Executive Order 20-05 states that the unemployment benefits paid as a result of the COVID-19 pandemic should not be used in computing the future unemployment tax rate of a taxpaying employer. 

Employers who institute furloughs or terminations as a result of the coronavirus should be clear that the pandemic played a part in the employer’s decision. Even if this decision is based on other factors, such as a history of absences or poor performance, employers should still note the coronavirus as one of the reasons underlying its decision in order to gain the protection of Executive Order 20-05. 

Paid Time Off

The employee handbook will determine whether the employer must pay accrued Paid Time Off (“PTO”) to employees who are terminated or furloughed. If the handbook is silent (or nonexistent), Minnesota courts will look to the employer’s past practices to determine the employer’s obligations.

Employers that provide PTO will need to determine whether they need to pay these accrued hours to employees who are furloughed or permanently terminated. Our attorneys have extensive experience handling these issues and we can advise you on your obligations when you intend to terminate employees or place them on furlough.

Furlough v. Termination

Employers who intend to downsize will need to decide whether they will place their employees on a furlough, a short but indefinite period when employees are not working, or whether they should permanently terminate the targeted employees. In either case, the employees are not working and are usually not entitled to wages. Minnesota courts, however, will consider whether an employee was furloughed or terminated when determining whether an employer is obligated to provide certain benefits. 

Many legal and practical implications influence this decision. We have significant corporate governance and employment law experience and, as such, we are highly qualified to guide your business when you are considering these two alternatives.

Union Employees

Union employers should consult their collective bargaining agreement (“CBA”) before making decisions regarding furloughs or terminations. CBAs often contain severe repercussions if an employer is in breach and some even impose personal liability on the business owner. On the other hand, your CBA may contain provisions that give you flexibility to handle the unexpected and destructive impact of COVID-19.

Our firm can review your CBA and determine your rights and obligations in the face of these unique circumstances. In any event, you should speak to counsel before picking up the phone and calling the union. Uninformed union employers who attempt such negotiations may find themselves facing a labor law complaint despite their best efforts to balance the needs of their employees against the economic realities inherent in a global pandemic. 

Conclusion

COVID-19 has changed the way Minnesota, and indeed the entire world, does business. Executive Order 20-20 raises the stakes by preventing many Minnesotans from reporting to work. The attorneys at Pruvent can assist employers who are dealing with these changes and increase the chance that your business emerges from the coronavirus pandemic with less damage (and potentially stronger and more prepared than before).