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August 23, 2012
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"Hurricanes: Managing Through The Storms"
 
To Pay or Not to Pay? That is the Question.

One of the most important questions asked by employers is, "If my business is shut down in the aftermath of a hurricane, do I still have to pay my employees?" The answer depends on the status of the employee as exempt or nonexempt under the Fair Labor Standards Act (FLSA), which in turn depends largely on the work he or she performs.

The general answer is that employees exempt under the FLSA must be paid an entire week's salary if they perform any work during the workweek, and that nonexempt employees must be paid only for the hours actually worked. Because this is a generalization and because there are many exceptions and wrinkles that could apply to any particular situation, make sure to contact your legal professional for help if you have any questions.


Nonexempt (usually hourly) employees:

An hourly employee must only be paid for work he or she actually performs. Thus, if your business is shut down as a result of a hurricane or other natural disaster, you do not have to pay nonexempt employees for any hours not worked. The bottom line is that they don't work, they don't get paid. Make sure that, as an employer, there is no language in any of your policies to the contrary - be sure to review your policies and handbooks to ensure they contain nothing that could give rise to a contract or quasi-contractual claim. Finally, make sure that you do not have an actual employment contract with the employee that could govern the terms of his or her wage payments.

Exempt (usually salaried) employees:

The general rule for salaried/exempt employees is that they are required to be paid if they perform work at some point during the workweek. So, unless your business is shut down for more than an entire workweek, your exempt employees are entitled to be paid for the entire week in which they worked.
  • One approach employers have considered is to require salaried employees to apply unaccrued vacation or leave balances for the days not worked. However, the DOL has disapproved of this practice, so employers will do so at their own risk.
  • Another approach could be to lower your exempt employees' salaries on a going-forward basis if you reasonably anticipate those employees will be working reduced weeks for an extended period of time. This, of course, could raise morale issues, so this option should only be implemented after careful consideration. Additionally, if you have a contract with a salaried employee where the salary term is definite, you will not be able to adjust the salary downward without the employees consent.
  • Consider whether circumstances exist that would allow an exempt employee's salary to be docked for a full day's absence.
In deciding issues of employee pay after a hurricane, consider this information compiled by the Society for Human Resource Management ("SHRM") in a survey taken after Hurricane Katrina swept through the Gulf Coast: 75% of affected employers provided special pay or other additional assistance to their employees who needed it and 46% said they would keep out-of-work employees on their payroll indefinitely. The point to be made is that if and when the time comes that you are faced with making these decisions, there are other factors that you will and should consider than just the bare minimum legal requirements.


Other areas to consider:

Actual Payment of Your Employees - How will you pay your employees if your business is shut down? Consider direct depositing early your employees' payments early or withdraw enough cash to pay them for their services if the banks and ATMs are closed.

Health Insurance/Benefits Issues - Check your plan and consult with your insurer. Many policies automatically lapse if an employee does not work for a certain period of time. This will ensure your employees are not subject to any surprises in a worst case scenario.

What follows is a list of common questions we receive from employers, along with preliminary answers. Should you want to discuss any of these issues further, please contact any one of our Employment Law Group attorneys.

Q: What about requiring non-exempt employees to apply their accrued paid vacation or leave time?
A: If you have a statement in your Policy Manual or Handbook alerting the employee to this practice, you can do it. You have the option of asking those employees to apply unused vacation or leave time to days worked, but only if they are alerted to this practice in writing.

Q: Do I still have to pay time-and-a-half for overtime under the FLSA if employees are working over 40 hours per work to help me clean up or recover from the storm?
A: Yes. The time-and-a-half requirement of the Fair Labor Standards Act continues to apply post-hurricane.

Q. What about employees who "volunteer" to come in and help clean-up the office. Do I have to pay them?
A: Yes. For purposes of the FLSA any work performed by a nonexempt employee to benefit the employer must be compensated.

Q. Are employees eligible for unemployment compensation if my business is shut down?
A. Yes, provided they meet the minimum employment requirements and are out of work for at least 1 week.

Q. If I provide financial assistance to my employees getting unemployment will that jeopardize their unemployment compensation payments?
A. No, provided that the payments are not conditioned upon any services being provided by the employee.

In addition to the foregoing, there are a number of other issues worthy of consideration:
  • Applicability of laws protecting disaster-relief workers
  • Termination of employees unable or unwilling to return when your business reopens
  • To pay or not to pay employees when the business is closed, or to charge employees' PTO accounts
  • Business interruption insurance may not be as safe a harbor as you think
Disclaimer: This article does not represent legal advice. Every case is unique. If you have any questions, feel free to contact any one of our attorneys, Steven L. Schwarzberg, Kristin M. Ahr, Grace M. Murillo or Lisa M. Khoring at (561) 659-3300 or visit or website at www.schwarzberglaw.com.
 
 
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