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Emergency Paid-Leave Law Could Trigger ‘Big-Time Litigation’

April 3, 2020, 10:30 AM

Attorneys on both sides of labor and employment cases warn that companies should prepare for a potential onslaught of private litigation from workers covered by new paid-leave mandates under federal coronavirus-relief law.

The Families First Coronavirus Response Act (Public Law 116-127) gives workers at companies with more than 50 and fewer than 500 employees the right to bring cases over unpaid leave to court. That includes through class or collective actions—a provision that some businesses may not realize is part of the law, labor and employment attorneys said.

“This can be big-time litigation for the plaintiffs’ bar,” said Randy Johnson, a partner with Seyfarth Shaw.

The law’s paid- and family-leave provisions, which took effect April 1, will be available to as many as 61 million workers, the Labor Department said in an implementing rule released Wednesday. The department said it would give employers until April 18 to comply before it took any enforcement action, but businesses can face private lawsuits now that the law is in effect.

Plaintiffs’ attorneys and those who represent management predict the new policies will result in a groundswell of litigation in the near future because of a multitude of factors, including uncertainty about what’s expected of employers and confusion over how to determine which workers are covered by the new mandates. Navigating the law will be even more challenging for businesses as they try to manage their operations through a precipitous drop-off in national economic activity and an indefinite period of risk and uncertainty created by state and local coronavirus-response orders.

“It means there will be some room for employers to do the wrong thing, and there will definitely be some litigation on that,” said Megan Mechak, a partner at McGillivary Steele Elkin LLP, a firm that represents workers and unions. “We, as plaintiffs’ attorneys, are definitely paying a lot of attention to the law and how it is being implemented.”

Mechak predicted courts will be handling cases related to alleged violations of the law well into 2021.

Some legal observers and workers believe private litigation stemming from the law will be more limited. The law exempts companies with 500 or more employees from the paid- and family-leave mandates and limits family-leave requirements for small businesses. And, traditionally, individual lawsuits over unpaid family and medical leave are slow-moving compared with other types of federal wage litigation. Workers may also be reluctant to go to court because of the hassle and expense relative to the potential gain.

“It’s unrealistic for workers to go to court to get their sick time and vindicate their rights,” said Sherry Leiwant, co-founder and co-president of A Better Balance, a group that advocates for paid sick time for workers. “Workers don’t tend to go to court because there isn’t much money at stake.”

The potential for Labor Department enforcement action also could cut down on the number of courtroom battles. Businesses face hefty damages if they’re found in violation, including back pay and attorneys’ fees. Employers also can be hit with double back-pay awards, known as “liquidated” damages, unless they are able to show they acted in “good faith.”

Questioning the Fine Print

The new federal mandates generally require companies to pay up to 10 weeks of partially paid family and medical leave to workers who need to care for a child in the event of school or day-care closures. Workers also can receive up to two weeks of sick leave if they test positive for Covid-19, are subject to quarantine, or are caring for a family member or loved one in similar circumstances.

The Labor Department’s rule helped clarify some lingering questions for employers and workers by further defining categories of qualifying and exempt workers, and by clearly outlining enforcement action employers could face, attorneys said.

But questions remain for employers and workers over the department’s broad definitions of “first responders” and “health-care providers” under the rule, Mechak said. Employers using these definitions may exempt workers who should be covered, she said.

There also is potential for litigation surrounding whether a company meets the 500-worker threshold for exemption from the mandates, a point that could involve questions of worker classification as contractors, or virus-related furloughs and layoffs. The DOL rule did not provide clarity on that, several attorneys told Bloomberg Law.

Employer-side lawyers said they are working to educate clients on the risks posed by the leave requirements, to limit instances in which businesses violate the law despite good intentions. “They are not thinking through that every ambiguity in this bill can be exploited by the plaintiffs’ bar,” Johnson said.

That will apply for cases brought under the family-leave provisions as well as those citing the sick-leave mandates—the former using existing Family and Medical Leave Act enforcement mechanisms, the latter those for the Fair Labor Standards Act.

Several states have their own paid-leave laws, and some have enacted emergency measures as well.

Class Cases More Appealing?

While many workers may find it difficult to bring individual suits because the returns may not outweigh the costs of litigation, they may instead try to band together as a class, said Laura O’Donnell, a Texas-based management attorney for Haynes and Boone.

“If an employer failed to give leave to a group of workers, I could see litigation around that,” O’Donnell said. “That dollar value would be greater, and I could see that being more appealing to plaintiffs’ attorneys.”

The DOL’s rule confirmed that cases to recover sick time may be brought under the Fair Labor Standards Act’s collective-action provisions, she said. Because those standards are considered to be more lenient for workers to meet, in comparison to class actions under Rule 23 of the Federal Rules of Civil Procedure, a plaintiff’s counsel may be more inclined to bring such claims, she added.

However, most courts have held that the Family and Medical Leave Act, which applies to the 10 weeks of partially paid family leave under the new relief law, is governed by the more stringent class certification requirements of Rule 23, Johnson said.

“We are just at the beginning of how we can best help workers who can’t access paid leave,” Leiwant, the worker advocate, said. “It is an emergency situation and hopefully they will follow the law. In the past, opposition from the business community has been intense to local leave laws, and then they just do it.”

—With assistance from Chris Opfer.

To contact the reporters on this story: Jaclyn Diaz in Washington at jdiaz@bloomberglaw.com; Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editor responsible for this story: John Lauinger at jlauinger@bloomberglaw.com

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