Employee Compensation During Emergency Shutdowns: Pay or Not Pay?

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In the middle of one of the worst hurricane seasons in recorded history, we have been receiving questions across our offices about how to handle pay for emergency shutdowns in the middle of a day, extended company closings, and planned or unplanned late openings. With ice storm and blizzard season around the corner, I will try to summarize some of these pay considerations. Always keep in mind the basic principle that employees always must be paid for all time actually worked.

Salaried Employees

Salaried employees, to retain their overtime exemption, must be paid their full salary in any week in which they perform any work. Thus, a closure for an approaching storm front or unusable work location will not allow an employer to deduct any percentage of a salaried employee’s pay for the hours not worked.

There basically are three exceptions for inclement weather to this rule for salaried employees. First, if the employee has a paid-time-off (PTO) plan, the employer may require the employee to use some of his PTO time for a weather-related closure. In this instance, the salaried employee obviously continues to receive full pay (but some of it comes from the PTO bank). The second exception is that an employee need not be paid his salary in any work week in which no work is performed. This exception would apply to the more severe Harvey-like disasters. So, if the office is closed the entire week, an employer does not have to pay even exempt employees who performed no work. Finally, employers may deduct for full-day absences, but only full-day absences, if the business is open and the employee is unable to get to work due to the weather (this would be categorized as an unpaid personal day for something other than sickness or disability).

Hourly Employees

Pay for hourly employees during weather disasters is fairly simple. Hourly employees must be paid for all hours actually worked. If employees do not come in, are turned away at the door, or are sent home early, the rule is the same–pay hourly employees for hours actually worked.

Employers are not required to pay “show-up” pay under most state laws. These include the southern states. Some northeastern and western states do have show-up pay requirements contained in their state laws. Those laws should be checked if necessary for those requirements and any exceptions to them, such as exceptions that result from timely and effective notice of a closing by the company.

Working Remotely

As mentioned above, all employees, hourly and salaried, must be paid for all time worked. This includes time worked from home or any other offsite location. Employees with remotely logged-in computers, cellphones, and old-fashioned toolboxes must be monitored for actual work performed when the employer’s business otherwise is closed.

In this age of working remotely, whether using new technology or just running old fashioned errands while the office is closed, employers must be careful with hourly employees. Hourly employees must be paid for all time actually worked, even when working away from the company’s normally required time clock or log-in procedure.

Contractual Pay

In addition to considering federal and state wage-and-hour laws, contractual requirements could impose greater obligations on an employer. Individual employment contracts could contain such provisions, as could collective bargaining agreements (CBAs) in union settings. CBAs, for example, often contain show-up pay provisions and have restrictions on mandatory use of PTO.

Employees Who Work Even Though It’s Not Required

Employees must be paid for all time worked. That is the rule no matter whether the employee was required to work or did so voluntarily. Additional payments or bonuses are allowed but not required. Of course, gifts and other forms of recognition also are allowed. Unfortunately, however, for the purpose of calculating overtime pay for hourly employees in a given work week, all remuneration must be included in the base rate before multiplying that rate by time and a half for hours worked over 40.

When in doubt, always start with the basic principles that hourly employees should be paid for all of their time worked and that salaried employees should be paid all of their full salaries unless a very narrow exception applies.

John W. Hargrove is a partner and chair of the labor and employment practice group at Bradley Arant Boult Cummings in Birmingham, Alabama. Contact him at jhargrove@bradley.com.

Reprinted with permission from the Oct. 4, 2017, edition of the Daily Business Review © 2017 ALM Media Properties, LLC. All rights reserved.