Is Your Company Prepared to Handle A Natural Disaster?

Natural disasters such as hurricanes, floods, and earthquakes can greatly impact an employer’s ability to conduct business, keep worksites open, and effectively manage their workforce. A frequent question that arises during any natural disaster is:

What happens to FLSA requirements if a disaster causes the employer to close its business?

The answer to this question first depends on whether a particular employee or group of employees is exempt or non-exempt from the FLSA’s minimum wage and overtime requirements. Generally, an employer must pay non-exempt employees only for hours actually worked. By contrast, an exempt employee must receive his or her full compensation regardless of actual hours worked, as long as some hours are worked. These same principles apply in the wake of a natural disaster. Additionally, during a disaster, an employer’s wages obligations are dependent on whether the facilities are closed for business or whether an employee unilaterally decides not to report to work.

Non-Exempt EmployeesThe FLSA’s minimum wage and overtime requirements are not subject to waiver during natural disasters and recovery efforts. Employers must continue to pay non-exempt employees at least the federal minimum wage for each hour actually worked and the applicable overtime wage for all hours worked in excess of 40 during a workweek.

Thus, if the worksite is closed due to a disaster, an employer is not required to pay non-exempt employees for time not worked during the closure. An employer may allow non-exempt employees to receive some form of compensation for days in which the employer’s facilities are closed by allowing the employees to choose to charge such time to the employee’s accrued leave time (personal or vacation time).

There is an exception to this rule for non-exempt employees who receive a fixed salary under a fluctuating workweek arrangement. An employer must pay these employees their entire fixed salary for any week in which any work is performed. Thus, if these employees work only a few hours when a disaster strikes, they are entitled to be paid their fixed salary for the entire workweek.

Exempt EmployeesEmployers must pay exempt employees their full salary if the worksite is closed or unable to open due to emergencies or disasters lasting less than one week. Again, employers may direct exempt staff to take vacation or debit their leave bank accounts – provided that the employees receive in payment an amount equal to their guaranteed salary.

The rules change if an employer’s facilities are open, but an exempt employee does not report to work. An exempt employee who does not report to work is considered to be on a voluntary absence for which an employer may take a limited full day salary deduction. It is critical to note, however, that deductions for less than a full day’s absence are not permitted by the FLSA. An exempt employee who reports to work for even a partial day during a natural disaster is entitled to the full day’s salary.

To ensure compliance and reduce the risk of FLSA violations during a natural disaster, employers should consider establishing an emergency or disaster policy that: (a) allows non-exempt employees to charge their leave bank accounts if the employer’s facilities are closed; and (b) requires exempt employees to charge their leave bank accounts either when the employer’s facilities are closed or when the employee refuses to report to work during a disaster.

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