Harvey’s Destruction Will Test Companies’ Pay, Leave Policies

Hurricane Katrina produced several major lawsuits related to leave and wage-and-hour issues.

With Hurricane Harvey and other storms or disasters, a company’s failure to communicate HR matters to its employees can wreak havoc in survivors' lives—and create more HR problems later.

The destruction wreaked by Hurricane Harvey on Houston and greater southeast Texas will close businesses for an undetermined amount of time and potentially leave out of work tens of thousands of people stuck in shelters or grappling with flooded homes.

In the early days after a major natural disaster—at least weeks of recovery—what should employers consider about pay and work obligations they can take to avoid long-term repercussions for failing to protect employees?

Harvey is the first major hurricane in a decade, since Hurricane Katrina ravaged Louisiana in 2005. In the aftermath of Katrina, companies were forced to confront work-leave issues and staffing strains.

Workers’ rights organizations also took the U.S. Labor Department to task for not providing overtime compensation for storm cleanup. After Katrina, there were several major lawsuits surrounding leave and wage-and-hour issues. Many companies updated their disaster policies.

Until businesses resume operations, companies affected by Harvey have a few options they could consider, said Donald Schroeder, a partner at Foley & Lardner in Boston who specializes in employment law.


Options for employers after a disaster

Employers should explore whether they can relocate operations from Houston, Schroeder said, and they should look at their leave policies—or even consider imposing a mandatory leave.

He also said employers should assess any policies that affect whether nonexempt employees are required to use paid time off during the shutdown period.

“Communication with the workforce is critical,” Schroeder said. “Employees may assume they are being paid by the company even though they are not able to report to the company's location due to flooding or, worse yet, complete destruction of the company's offices and/or their residences.”

Schroeder said a company’s failure to communicate about compensation and other matters “can potentially lead to multiple wage-and-hour problems down the road.”

The three biggest labor areas employers will face are wage payment, leave issues and staffing, said Kim Rives Miers, a Littler Mendelson shareholder in Dallas.

“This is not your typical hurricane,” Miers said. “People will be out for such an extended period of time, employers will be forced to make hard decisions.”

Federal labor laws only entitle hourly workers to compensation if they are working, even if they are not working because a worksite is shut down or if an employee decided to evacuate. Yet there could be exceptions during a major weather event. Employers could consider on-call time and companies must pay for remote work.

Employees who are on salary, or exempt workers, must be paid their wages, even when an employer shuts down its operations. With salaried workers, employers may require them to use vacation or sick time, depending on the company’s policy.

Miers said Littler Mendelson is advising clients to examine their leave policy and follow it carefully—and also apply it equally. Still, employers faced with the aftermath of a disaster can be flexible.

“You need to create your plan and stick to it,” she said. “In these extreme circumstances, we are encouraging employers to be flexible, but they need to be fair and consistent with this flexibility.” She added: “We don’t need to be so afraid of breaking the law, we aren’t doing the right thing by employees.”

Mandatory leave can be a tricky area for employers. Employers do not have to pay hourly workers, or have a nonexempt status, if they are not working, which would dramatically affect a large number of workers affected by the devastation. They can also be required to use paid time off and sick days. Medical leave is also common during such incidents.


‘Extraordinary circumstances’

In a blog post addressing this issue, Miers and her Littler colleagues wrote, “Even if applicable leave laws and employer policies and practices do not provide for non-medical leaves of absence, the circumstances of a natural disaster will probably present extraordinary circumstances that may allow an employer to grant the time off to employees directly or indirectly affected by the disaster.

“While strict adherence to leave policies is the conservative and prudent management approach for employers in normal operating circumstances, when a disaster strikes employers should be flexible and considerate by expanding or at least temporarily relaxing otherwise restrictive existing leave policies.”

Other issues employers should consider are employee assistance programs, property and casualty claims, workers’ compensation inquiries, benefits continuation options and tax-reporting duties.

“The biggest piece of advice we have is to do your best to do the right thing by your employees while complying with the laws,” Miers said.

This week, the U.S. Labor Department announced an update on the employee benefit plan compliance for those impacted by Hurricane Harvey.

“Our deepest and most immediate concern is for those who are in harm’s way, and for the first responders who will work tirelessly to help those affected,” said U.S. Secretary of Labor Alexander Acosta. “We also realize that employers and employees impacted by Hurricane Harvey will need assistance in dealing with employee benefits issues arising from disruptions in banking and payroll processing.”

The Labor Department issued guidance for employers, labor organizations and participants who might be affected for the foreseeable future by the effects of the storm, including allowing for delay in payments for the employee pension benefit plan and leniency on blackout period notification.

 

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