Wages During Disasters

As an employer, am I required to pay my employees wages if a natural disaster temporarily disrupts my business? Do I still have to pay wages if my business is flooded and employees can’t work?

The lawyer answer is, of course, “It depends.” Whether you are required to pay employees during a temporary closure due to natural disaster varies based on whether your employees are exempt or non-exempt.

The Federal Labor Standards Act (FLSA) is a federal law governing wages and hours of work. For employees covered by FLSA, it requires employers to pay non-exempt employees no less than the federal minimum wage for each hour actually worked, and overtime at one and one-half times an employee’s regular rate of pay for hours worked in excess of 40 per week. FLSA requirements are not waived during a natural disaster.

The key to FLSA is the phrase “hours actually worked.” If you are unable to provide work to employees, you are not required to pay non-exempt employees for the hours they would have otherwise worked.

Exempt employees are treated slightly differently. The FLSA implies that exempt employees should be paid even if there is a temporary closure. If an exempt employee is ready, willing, and able to work, you can’t make deductions from their pay, even if work is not available.

In California, the Division of Labor Standards Enforcement (DLSE) doesn’t distinguish between exempt and non-exempt in its Interpretations Manual. However, while the DLSE created the manual to assist with interpreting law, it is not itself a law. Since it’s not completely clear, I recommend following the federal law.

If you have a labor contract with your employees or labor union, check your contract to see if you are required to pay employees during natural disasters or other temporary closures.

Now here’s an interesting twist — what if your business floods and the water destroys your business records? How will you calculate your employees’ wages?

The law requires that employers pay at least the full minimum wage and overtime compensation due for covered employees for hours that the employee worked. You may have to allow your employee to recreate their timesheet and pay accordingly.

Electronic record-keeping and a good backup system for financial and tax records may help mitigate risks that arise during a disaster. We recommend that businesses create backup copies of electronic files, store them in a safe place, and include a cloud-based system as part of that strategy. Remember, keeping copies of your business records at home won’t help if both your home and business are inaccessible.

Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached atmary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.