Due to the sudden economic turbulence resulting from the COVID-19 pandemic, employers have been exploring ways to temporarily reduce operating costs.  Many employers are seeking alternatives to layoffs.  Such alternatives may include reductions in pay and hours of work, furloughs and shutdowns of operations, and work share programs.  The following identifies the legal and practical considerations associated with the alternatives available to employers.

Reductions in Pay and Hours

An employer is generally free to prospectively change an employee’s rate of pay and scheduled hours.  This can be accomplished by reducing employees’ hours and pay by a proportionate amount.  Employers should consider the following issues and risks before altering work hours and compensation:

Employment Agreements.  Employers must determine whether any employment contracts or offer letters guarantee a level of compensation or set schedule to the affected employees.  Employees with contracts setting forth their level of compensation and work schedule should be notified in writing of the proposed changes.  Employers should be prepared to engage in negotiation on the changes terms in order to minimize the risk of breach of contract disputes.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm’s Whistleblowing & Retaliation Group. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination, harassment and retaliation; wage-and-hour laws; breach of employment contract…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm’s Whistleblowing & Retaliation Group. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination, harassment and retaliation; wage-and-hour laws; breach of employment contract; and restrictive covenants (e.g., non-competition agreements). Steven is also at the forefront of defending whistleblower retaliation claims, and routinely conducts investigations arising from whistleblower reports. He has successfully tried cases to verdict in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S. District Court for the Northern District of Illinois. He has also testified in defense of his investigations in federal court.

Photo of Kramer Rice Kramer Rice

Kramer Rice is an associate in the Labor & Employment Law Department and a member of the firm’s Employment Litigation & Arbitration, Class & Collective Action, Wage and Hour, Sports Law, and Appellate Groups.

Kramer represents and counsels clients in all aspects of…

Kramer Rice is an associate in the Labor & Employment Law Department and a member of the firm’s Employment Litigation & Arbitration, Class & Collective Action, Wage and Hour, Sports Law, and Appellate Groups.

Kramer represents and counsels clients in all aspects of labor and employment law. He regularly defends employers before state and federal courts and administrative agencies in single and multi-plaintiff actions concerning discrimination, harassment, retaliation, wage and hour, union contract, and restrictive covenant disputes. To this end, Kramer has represented client interests before numerous state and federal courts of appeal. Kramer’s representations span an array of industries and organizations, such as sports leagues and teams, law firms, financial institutions, colleges and universities, media groups and energy companies.

Photo of Jordan Glassberg Jordan Glassberg

Jordan Glassberg is an associate in the Labor & Employment Law Department. Prior to joining Proskauer, Jordan clerked for the Honorable William H. Pauley III in the Southern District of New York.

Before clerking, Jordan graduated from Duke Law School, where he was…

Jordan Glassberg is an associate in the Labor & Employment Law Department. Prior to joining Proskauer, Jordan clerked for the Honorable William H. Pauley III in the Southern District of New York.

Before clerking, Jordan graduated from Duke Law School, where he was managing editor of the Duke Journal of Constitutional Law & Public Policy and a member of Duke’s Moot Court and Mock Trial Boards. While at Duke, Jordan received the Labor and Employment Law Award for the Class of 2017, won the Hardt Cup 1L Moot Court Tournament and interned for the United States Attorney’s Office for the District of New Jersey.

Photo of Elizabeth Dailey Elizabeth Dailey

Elizabeth Dailey is an associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Group.