Natural Disasters and the FLSA: Avoiding Business Interruption and Wage Liability
By James J. Swartz, Jr.
Hurricane Matthew provides yet another opportunity for employers to consider the challenges presented by natural disasters. Our thoughts and prayers are with the good people of Florida and coastal Georgia, North Carolina, and South Carolina as they prepare for and recover from this significant storm.
Employers may be forced to close facilities or cease operations at worksites in the path of natural disasters such as hurricanes, severe winter storms, and floods. With the myriad concerns caused by business closure (supply chain disruption, customer service, facility security), one can see how state or federal wage payment obligations could be overlooked. Wage payment obligations under the Fair Labor Standards Act vary depending on the exempt or nonexempt classification of the affected workers.
Business Closures and Exempt Employees
For exempt employees, an employer must pay the full salary if the employee worked even part of the week of the closure. An employer can, however, utilize an employee’s paid time off bank to account for the payments for the days during which the employer’s facility was closed. For example, if an exempt employee worked on Monday and Tuesday prior to a facility’s closure for the remainder of the week due to an approaching hurricane and recovery from damage, the employee must be paid her full salary for that week. The employer may, however, deduct 3 days from the employee’s PTO bank to cover a portion of the salary (assuming a five day work week). If the employer was closed for the entire week, it would not have to pay the exempt employee’s salary, assuming the employee performed no work on- or off-site in that week.
A different result occurs for the exempt employee who cannot get to work even though the employer’s facility is open. In this common scenario—an exempt employee decides that the roads are impassable or has some other transportation issue that causes him to decide not to come to work—the employer may deduct a full day’s pay from the exempt employee’s salary because, under the FLSA, the absence is considered voluntary and personal.
In either case, employers might consider finding ways for exempt employees to work remotely, if they can. In both cases, an employer can mitigate its business interruption if their exempt workers are providing valuable services from home (for example, contacting customers, or performing other work remotely) and avoid hampering morale by making salary or PTO deductions (even if permissible under the law).
Business Closures and Nonexempt Employees
Employers have different challenges when managing their nonexempt workers during times of natural disasters. While employers need only pay nonexempt workers under the FLSA for time actually worked, employers must be conscious of the potential for nonexempt workers to perform work from home or other off-site locations. If an employer has reason to believe nonexempt employees are performing work from home or away from their assigned location, the employer should take affirmative steps to determine (a) whether such work was performed off-site, and (b) how much time the employee worked.
On-Call Time for Non-Exempt Employees
Another common issue regarding nonexempt workers is the payment of on-call time or payment for employees who show up to work only to be sent home. Employers should be clear in their communications about how and when nonexempt employees should come to the facility, and take care not to tell nonexempt employees that the facility is closed but that the employees are “on-call” in case the facility can be re-opened. On-call time for nonexempt employees is compensable, and, in most cases, only select groups of nonexempt employees are truly needed on-call. Moreover, several states (including New York) require employers to pay employees certain payments if they come to work at the employer’s request only to be sent home due to facility closure.
Different states have different requirements for the timing of wage payments to employees. In some states, these wage payment laws include monetary penalties for late payments (sometimes accruing on a daily basis). As a result, employers that rely on non-electronic payment methods should consider how prolonged facility closures may impact their ability to make timely wage payments.
In severe and unexpected disasters (unexpected snowstorms, tornadoes, etc.), workers may become stranded at the employer’s facility. In this scenario, non-exempt workers need to be paid for any time spent working. To avoid wage liability in this scenario, nonexempt workers should be fully relieved of work responsibilities, ideally by providing them a separate room or area to sleep, converse with each other, or otherwise avoid the possibility of working.
While natural disasters certainly present challenges for employers, ensuring that employees are properly compensated can minimize disruption to the business and buoy morale as workers deal with potentially reduced work opportunities and loss of property caused by disaster outside the workplace.