March 2008

Disaster Planning for Employers

Holland & Knight Newsletter
William B. deMeza Jr.

This is the second (and final) part of an article addressing an employer’s compliance with the numerous and various employment laws after being stricken by a natural catastrophe. Although many people think of “disaster preparation and response” in the context of putting up hurricane shutters or stocking the tornado shelter, prudent managers also anticipate the personnel, payroll and workplace health/safety needs of a business. This article will address some wage/payment, workers’ compensation/safety/health, military “call up” and benefits issues that employers may encounter in the event of a disaster.

Wages/Payment Issues

It appears that wage claims asserted under the federal Fair Labor Standards Act (FLSA) were the most common and financially significant employment-related claims made against employers arising out of the very active 2004 and 2005 hurricane seasons. And it seems that most claims stemmed from employers’ failures to focus on the wage issues before disaster struck.

Many employers seem to have erred by confusing “work” and “not work” hours during the frenzy of disaster recovery, particularly when employees were living temporarily in the employer’s facility. For example, several large Florida hospitals had to pay millions of dollars in response to claims from non-exempt employees who had not been paid for all hours worked during and after hurricanes hit the hospitals. Many of the hospital employees had remained in the facilities during the storms and, because they were available, frequently were called to help during even supposedly “off duty” hours. It was later determined that not only did these employees work during “off-duty” hours, but they worked so much that they were never really “off” and had to be paid for all hours they were on the hospital premises. Thus, if employees are going to remain on the premises, you may not ask them to work during “off duty” times without then paying for such hours worked (including, perhaps, payment for all hours on the premises if the workers never have an opportunity to relax or attend to personal business). To minimize such potentially expensive collateral complications of disaster recovery, employers should try to establish defined hours of work and find a location on the premises where off-duty employees can rest and eat without being called to work.

It is important to keep accurate records of employees’ “hours worked.” Although a disaster may damage computerized time-keeping systems, the federal Department of Labor (DOL) will require some evidence of workers’ hours. Time recording need not be electronic as long as it is accurate. It may be best to have employees record their own hours on forms you provide (with employees’ “hours worked” entries given reality checks by human resources personnel) to minimize subsequent employee claims that the records are not correct.

Exempt employees’ pay also requires attention in the post-disaster environment. The FLSA’s “salary basis” test mandates that all exempt employees (including “executive,” “administrative” and “professional” employees) be paid a full week’s salary during any week that they perform any work and that improper deductions from such salaries may result in loss of the exemptions. Although exempt employees normally must be paid for the entire week even if a facility is closed for a part of the week (i.e., normal full-week salaries must be paid), the DOL has approved full-day deductions from exempt employees’ salaries if they cannot report to work because of bad weather. The DOL also has said that, because vacation and other paid-time-off (PTO) is not required by law, employers can charge exempt employees’ PTO accounts even for partial day absences occasioned by weather, as long as their salaries are not reduced.

Employers may be forced to consider harsh and unpleasant but necessary cost-cutting methods after a disaster. It is permissible to decrease the base salaries of exempt employees who will be working only partial weeks during disaster recovery if they are paid the full (but reduced) weekly salary throughout the recovery period regardless of the number of days that they actually work during a given week (and, of course, if they are paid the FLSA weekly minimum salary of $455). Further, employers might wish to examine whether their PTO policies require employees to use up their vacation time during absences caused by a disaster and, if not, whether the policies should be revised to allow the company such flexibility; requiring employees to exhaust PTO during recovery will maximize full-staffing (without interruptions for vacations) when normal operations resume.

Wage payment systems may be disrupted by a disaster. Employers that use a payroll service should determine in advance how “hours worked” data can be collected and provided after a disaster and whether the payroll service has remote locations that can issue paychecks if the local site is damaged/inoperative. Employers also should reconsider the usefulness of direct deposits in a post-disaster environment (recognizing that some states, including Florida, limit employers’ ability to punish workers who will not agree to direct deposit).

Workers’ Compensation/Safety/Health Issues

Workers’ compensation insurance should cover most disaster-related workplace injuries and preclude personal injury lawsuits. But personal injury lawsuits are not precluded if an employee “intends” the harm – intent in this context can mean acting very irresponsibly with respect to workplace safety. The mess of disaster recovery creates conditions fostering employees’ claims that their employers “intended” to harm the employees and thus are subject to personal injury suits. For example, an employer likely would lose workers’ compensation protections if it asked workers to sponge-up water containing highly toxic chemicals without warning the employees about the toxins and providing protection for them. Thus, it is important to think about safe disaster recovery before it becomes necessary.

There are several measures that employers should use to minimize injuries during cleanup. First, assess the workplace and likely consequences of a disaster, including the safety risks that will be encountered by persons coming onto the site; workers’ compensation carriers frequently provide such assessments and advice without charge. Second, plan the specific cleanup/recovery work in advance and consider engaging professionals to do it (and, obviously, given the demand for their services, it is critical to retain such professionals before the disaster). Third, if the company is going to do its own cleanup, consider recruiting employee volunteers for the work in advance of the disaster (to minimize claims that workers were forced to perform hazardous work) and providing enhanced pay/benefits for the volunteers (and, of course, purchase the necessary personal protective equipment in advance because it will be impossible to obtain after disaster strikes). Finally, if the company is going to do its own cleanup, consider tracking “who does what”; this may be helpful in disputing any subsequent injury/toxic exposure claims that arise out of their work.

Disasters not only raise workers’ compensation issues but also questions about regulatory compliance. The federal Occupational Safety and Health Administration (OSHA) requires employers to provide safe and healthful workplaces and to comply with numerous specific standards affecting workplace safety (i.e., the risk of accidents) and health (i.e., exposure to toxic substances and conditions). OSHA has been somewhat tolerant of but not blind to employers’ safety/health violations in prior natural disasters. For example, after the recent hurricane disasters in Florida and Louisiana, the agency went into an intensive “we’re here to help” mode, attempting to assist employers to ensure safe workplaces during recovery and being tolerant of technical but not significantly dangerous violations. But OSHA did not ignore clearly dangerous situations and cited employers for unprotected employee exposures to toxic substances, possible falls, structural collapses and electric shock.
OSHA standards do not expressly specify when a workplace is sufficiently safe for employees to return. Employers must analyze whether the specific conditions in their workplaces create significant hazards. It also is important to remember that OSHA (and some equivalent state agencies) protect employees who refuse to work when an employer deliberately does not address significant, known safety risks; although such “walk-offs” are disfavored by OSHA, it is possible that employees discharged for refusing to work in an unsafe environment may win their jobs back.

OSHA has very helpful “fact sheet” information on its Web site and its compliance officers also are readily available for consultation. Thus, for an employer anticipating unusual safety or health problems during a disaster/disaster recovery – for example, if there are large on-site quantities of toxic materials/electricity/gas – a call to the local OSHA area office could provide valuable information.

Military/Civilian “Call Up” Issues

Most employers now are familiar with the Uniformed Services Employment and Reemployment Rights Act (USERRA), which provides job protection for employees who volunteer for or are called to duty in the military. USERRA also applies to certain persons called to serve as part of the National Disaster Medical System (NDMS), including disaster medical assistance teams comprised of doctors and nurses as well as mortuary, veterinary and pharmacy personnel.

USERRA is specific and detailed. Assuming called-up employees satisfy their notice obligations, employers must provide job-protected leaves and, after the leave, reinstate the employees to the same jobs they held before the call-up (and give them most job-related changes and enhancements that they otherwise would have received). Military and NDMS personnel are protected by USERRA if they are actually called up (formally activated) to assist in disaster recovery efforts, even if they volunteer to be called up; they are not covered, however, if they merely volunteer without a formal call to duty.

Benefits Issues

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) imposes deadlines for employers to give employees information about continuation of group medical coverage after a “qualifying event” causing a loss of such coverage (such as loss of employment). The federal government has extended COBRA notice deadlines under catastrophic conditions in the past depending on the extent of the devastation and interruption of business/communications. If the COBRA deadline has not been extended, companies should send COBRA notices/elections even if disruptions in the postal service make their delivery doubtful (i.e., put the notices in the mailbox even if they may not be picked up).

Reducing employees’ hours after a disaster may have COBRA implications as well. Group medical plans typically have an “hours of service” requirement, stating that workers are not eligible for coverage unless they regularly work a contractually-stated minimum number of hours per week, often 30 hours/week. The “hours of service” requirement and any exceptions to it (including any exception anticipating decreased hours because of catastrophic events) are contained in the individual insurance policy. If the employee does not have the minimum “hours of service” and the failure is not otherwise waived or excused, the employee typically loses group medical coverage and the employer must give the notice required by COBRA. Employers typically cannot unilaterally waive the “hours of service” requirement in order to continue coverage for employees working fewer hours without risking serious “coverage” issues with the insurance carrier. Thus, the company should review its group medical policies to determine the circumstances in which employees could lose coverage after a disaster, and a self-insured employer should ensure that its stop-loss carrier agrees with any anticipated waiver of eligibility requirements for employees affected by the disaster.

Group medical carriers usually require use of specified physician networks. Employers should not assume that a disaster and inability to access the required physician network automatically will allow other medical providers to be used and reimbursed by the carrier.


Disaster planning should include careful thinking about human resources issues likely to be encountered in a catastrophe. Comprehensive, thoughtful planning will maximize the possibility of retaining the workforce and minimize the possibility of claims against the employer.

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