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Covid Hazard Pay Has Ripple Effects in Today’s Overtime Cases

July 26, 2022, 9:00 AM

Potential wage-and-hour liability exposure persists for employers that provided additional wages in response to the pandemic, even as Covid-19 hazard pay has mostly dried up.

Workers have filed at least 14 federal collective actions against employers for allegedly failing to pay all overtime owed because they didn’t include virus pay boosts when calculating overtime rates, according to a Bloomberg Law review of cases. Nine of those lawsuits have either settled or are in the process of being settled, court records show.

The lawsuits stem from the Fair Labor Standards Act’s computation of the overtime pay rate, which is equal to 1.5 times a worker’s base pay rate. Giving a pay bump related to the virus results in an increase to the base rate used to determine the overtime rate.

Smithfield Foods Inc. has faced at least three hazard pay overtime lawsuits, the most of any company in the review of cases. The Virginia-based meatpacker has agreed to pay $7.75 million to resolve one of the cases. Two other cases are on hold pending settlement talks.

Smithfield spokesman Jim Monroe declined to comment.

The window for companies to get hit with wage-and-hour lawsuits related to Covid hazard pay remains open even though the alleged violations could date back to 2020. The Fair Labor Standards Act has a three-year time limit for claiming willful violations. Some state wage laws give workers even more time to file, extending the limitations period to four or even six years.

Workers in health care, public safety, and businesses deemed essential—like grocery stores, pharmacies, and food production—were most likely to have received extra pay during the first phase of the pandemic. Employers boosted compensation, often adding $2 to $5 to workers’ hourly wages, or provided one-time payments.

“The brief love affair with essential employees saw its greatest flourishing in April and May of 2020,” said Dave Kamper, senior state policy coordinator for the Economic Policy Institute. “Unemployment numbers had hit a staggering high, and the whole country was on the same page about the risks of Covid and the importance of compensating workers who had no choice but face exposure.”

No Longer Heroes?

Covid hazard pay started disappearing for many workers by the summer of 2020, months before they would get access to vaccines, said Jennifer Trivedi, a professor at the University of Delaware’s Disaster Research Center.

“There was that initial moment when people were hailing grocery store workers as heroes, and that’s not a conversation we normally have,” she said. “But that died off pretty quickly. And so did hazard pay.”

Companies giving extra pay to compensate workers for exposure to the coronavirus has become very unlikely, especially in light of how the perception of risk has changed throughout the pandemic, Trivedi said.

A few cities and counties had mandated “hero” pay bumps for certain essential workers, though many of those requirements have lapsed. States like Pennsylvania, Vermont, and Louisiana used federal dollars to provide money to some workers.

Retroactive Payments Possible

Employers that provided hazard pay should conduct an internal audit of their pay practices to determine whether they should include such pay in their calculations of the regular rate for overtime purposes, said Jeff Ruzal, an attorney at Epstein Becker & Green PC. If so, they should adjust overtime-eligible workers’ base rates to account for the additional money, he said.

Any employer that finds it didn’t properly factor hazard pay into the calculation of overtime rates would need to make a strategic business decision about whether to correct the mistake by retroactively paying workers, Ruzal said.

Though it would be a good first step toward compliance and addressing exposure for the underpayments, one danger in making retroactive payments is that it could trigger a worker to sue for additional statutory liquidated damages based on the additional overtime exposure, he said.

Most FLSA lawsuits seek unpaid wages plus liquidated damages equal to the back pay amount, also known as “double damages.” Workers who receive a retroactive payment could sue for liquidated damages alone, because their employers’ attempt to fix the overtime underpayment would result in a late payment, Ruzal said.

“File that under ‘no good deed goes unpunished,’” he said.

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com