Paying Employees After a Natural Disaster

In late October, Hurricane Sandy slammed into the New York City metropolitan area, Long Island and New Jersey, leaving coastal communities ravaged. Thousands of homes and businesses were damaged; many were destroyed. Those who were merely inconvenienced by the storm’s devastating impact found themselves without power for days or weeks. Many who were fortunate not to lose power still lost telephone, e-mail and Internet service because their provider’s data systems were housed in Lower Manhattan. Nearly all of those locations lost power, and dozens of buildings were flooded with corrosive salt water as a result of storm surges.

Bridges and tunnels were closed to traffic until they could be inspected and certified as safe. Commuter trains which travel through tunnels to reach Grand Central Terminal and Penn Station did not run. New York City’s subway system was completely shut down (for only the second time in its more than 100-year history; the only previous system-wide shut down was in anticipation of 2011’s Hurricane Irene, which veered to the north of New York City wreaking havoc in Upstate New York and New England). Then there was a gas shortage leaving first responders and repair crews perilously short of fuel, and regular citizens relegated to rationing and long lines at the few pumps that worked and had gas in the tanks.

Unable to open for business, must employers still pay employees for not coming to work? Many employers suffered business closures or interruptions. The public transportation system shut down and the gas shortage meant employees could not get to work. So, as an employer, what are the rules? Should you pay or not pay?

The Short Answer: It Depends

Below is a brief outline regarding U.S. employers’ obligations (if any) under the Fair Labor Standards Act (the federal wage and hour law) to pay employees for time not worked as a result of a disaster.

Of course, any employee who actually works for the employer during a natural disaster (whether at the place of business or at home, and whether the business was open or closed) must be paid for the work performed.

1. Review Your Contracts and Policies

Employers must be mindful of collective bargaining agreements, employment contracts, policies and past practices regarding wage payment obligations to employees beyond those required by federal and state laws. Review those carefully.

2. Are Wage Payments Required to Employees During Days a Business Was Closed Due to the Storm?

The answer differs depending on the type of employee and for how long the business was closed.

a. “Exempt” employees –– those workers who are not entitled to overtime compensation under federal and state laws (e.g., those who meet the requirements of the executive, administrative and professional employee exemptions):

• must be paid for each day they were rendered unable to work due to the employer’s decision to close the business during the storm for a period of less than one week; although an employer may charge that payment against the employee’s available vacation, sick or other benefit day entitlement; but
• are not entitled to be paid if the business was closed for a full workweek during which no work was performed by the employee.

b. “Non Exempt” employees –– hourly workers subject to overtime compensation requirements:

• are not entitled to be paid for time they did not actually perform work due to the employer’s decision to temporarily close the business during the storm; but
• must be paid for all time actually worked during the temporary closing (it is recommended that such employees submit a statement of time worked if the employer’s regular timekeeping mechanism was temporarily suspended); and
• must be paid for all time the employer required the employee to be “on-call” during the storm and the employee was not effectively able to use the time for his or her own purposes (notably, some states impose other requirements as to whether “on-call” time is compensable).

3. Are Wage Payments Required to Employees for Days the Business Was Open, But They Could Not Report to Work Due to the Storm?

For most employees, the answer is no.

a. Exempt employees: Employers can deduct an exempt employee’s salary in full day increments for each day the business is open but an employee is unable to report to work (but may not “dock” pay for such employees in less than full-day increments if the employee reports late or leaves early due to the storm).

b. Non-exempt employees: Most non-exempt employees are not entitled to be paid for any days they did not actually perform work (they likewise are not entitled to payment for commuting time trying to get into the office during which no work was performed). A limited exception is applicable to those employees paid on a “fluctuating workweek” basis, who must be paid their full weekly salary irrespective of whether some work was missed as a result of the storm.

4. Are Wage Payments Permitted to Employees During Days a Business Was Closed Due to the Storm?

Naturally, employers are free to establish payment obligations beyond those legally required as a way to foster employee morale and loyalty to the business. However, employers should apply such benefit to its employees uniformly and be sure to inform employees that the benefit is applicable only due to this unique disaster and may not be similarly applied to future events.

  

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About Jeremy D. Richardson

Jeremy D. Richardson is an attorney on the fashion industry team at Phillips Nizer. His practice involves representing clients in the children’s apparel, accessories, and furniture industries. In April 2005, Jeremy was appointed to the Executive Committee of the American Apparel & Footwear Associations’ (AAFA) Product Safety Council, which most recently has focused its energies on educating its members about the Consumer Product Safety Improvement Act (CPSIA) of 2008. Jeremy guides start-ups and entrepreneurs through protection of their intellectual property, negotiation of partnerships, and when necessary, the litigation of matters that cannot otherwise be resolved.

About Marc B. Zimmerman

Marc Zimmerman is a labor and employment and litigation partner and colleague of The Giggle Guide^® contributor, Jeremy Richardson, at Phillips Nizer LLP. Marc’s legal practice involves representing general counsel and other company executives, including owners and those involved in human resources, on labor and employment law and labor relations issues.

Marc’s breadth of knowledge and experience includes the National Labor Relations Act, the Fair Labor Standards Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, state civil rights and anti-discrimination laws, the Family and Medical Leave Act, and the New York State Workers’ Compensation Law. Marc also counsels employers in the areas of termination, discrimination and harassment complaint investigation, supervisory training, policy development, collective bargaining, and wage and hour compliance.

About Phillips Nizer
Phillips Nizer LLP has been engaged in a wide-ranging practice of domestic and international law for over 85 years. Established in 1926 by Louis Phillips, former Assistant General Counsel to Paramount Motion Pictures, and Louis Nizer, considered one of the most outstanding trial lawyers of the twentieth century, the firm consists of lawyers who are well-respected leaders in their fields. The firm’s bond with the fashion and apparel industries began in the 1940s, a relationship that continues to this day almost 60 years later. Phillips Nizer’s principal office is in New York City, with additional offices in Garden City, East Hampton, and Hackensack, New Jersey. For more information, please visit: http://www.phillipsnizer.com/