As we approach this hurricane season and the fifth anniversary of Hurricane Katrina, now is an appropriate time to consider the lessons of that disaster. Swift action must be partnered with careful planning to help minimize employers’ exposure to liability after a natural disaster occurs. The following issues are likely to have the greatest impact on employers.
The Fair Labor Standards Act
After a natural disaster occurs, employers should be wary of issues that may arise under the FLSA. In particular, claims based on under-payment of wages may occur if the disaster destroys employee time records and employers subsequently fail to pay employees for work performed prior to the disaster. Additionally, employers should avoid violating minimum wage requirements under the FLSA when employees volunteer to perform job-related services off the clock. Because the FLSA includes “suffer or permit to work” in the definition of “employ,” time spent by employees volunteering to perform job-related services after a natural disaster may constitute hours worked where the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done.
Under the FLSA, if an employer suspends operations on account of damage from a hurricane or other natural disaster, the employer must pay non-exempt employees only for the hours they worked. Because the FLSA applies to employees regardless of their physical location, if an employer does not suspend business operations and non-exempt employees are allowed to telecommute or work from home after a disaster occurs, employers must implement and enforce clear policies that insure that non-exempt teleworkers perform overtime only with express, advance approval. Notwithstanding an employer’s advance approval permitting a non-exempt teleworker to work overtime, employers should be aware that permitting or suffering non-exempt employees to telework will constitute hours worked where the employer knows or has reason to know that the employees are continuing to work and the employer is benefiting from the work being done. Conversely, unless an employer suspends operations for an entire workweek, exempt employees must be paid their regular weekly salary regardless of the number of hours they worked.
Although some employers may opt to deduct time from an employee’s accrued vacation and leave for the period an employee remains out of work after a hurricane or other natural disaster occurs, employers should be wary that collective bargaining agreements or employment contracts may limit the right to deduct from an employee’s accrued vacation or leave time.
The Family and Medical Leave Act
Though not required to do so after a natural disaster, employers may voluntarily grant employees leave consistent with the FMLA. The FMLA does not, however, require employers to grant employees leave for non-qualifying events, such as cleaning a flood-damaged house or tracking down a missing relative.
When an employer completely suspends operations after a natural disaster, an employee on FMLA leave before the date that a business suspends operations is entitled to no greater rights, benefits, or protections than he/she had before taking leave. If, due to a natural disaster, an employer legitimately lays off an employee on FMLA leave, an employer is not obligated to maintain health benefits if benefits are also suspended for employees not on FMLA leave.
If an employee is the spouse, child, or parent of a uniformed service member called to active duty for a qualifying exigency, the employee may be entitled to an extension of up to 12 weeks of FMLA leave. After a qualified employee returns to work upon completing FMLA military-related leave, the employee should be reinstated to the same or a comparable position of employment at no less compensation, seniority, status, or benefits. For purposes of receiving benefits, an employee’s military related leave should not be considered a break in employment.
The Uniformed Services Employment and Reemployment Rights Act
When a natural disaster occurs and employees are called into service, employers must be aware of rules prohibiting discharging, denying initial employment, denying promotion, or denying any benefit of employment because of a person’s membership in, performance of, or obligation to perform uniformed service. Additionally, USERRA governs a qualified employee’s right to elect continued health care coverage. To the extent that USERRA does not protect employees, state laws mirroring USERRA may provide more extensive protection.
The Employee Retirement Income Security Act and Tax Relief
Employers who fail to plan for natural disasters may be exposed to financial liability under pension and welfare benefits plans governed by ERISA. Including a clause in an employer’s benefits plan that limits lump-sum use of paid leave for disasters, emergencies, and epidemics may limit an employer’s liability. Additionally, employers that have suspended operations, even if only temporarily, must decide whether to maintain benefits for employees. A major disaster may prevent an employer from being able to make contributions to employee pension and welfare benefits plans. In particular, issues may arise if an employer’s 401(k) record keeper or bank trustee is not operating, if employees cannot access their accounts, and if employers cannot afford to contribute to benefits plans. Special tax laws may help taxpayers recover financially from the impact of a disaster, especially when the President declares the worksite a major disaster area.
The Consolidated Omnibus Budget Reconciliation Act
Under a COBRA-covered health plan where coverage is terminated due to a cessation of operations, an employer must send COBRA packages to employees and their covered dependents at their last known address. However, after a hurricane or other natural disaster occurs, employers may encounter issues if the disaster has destroyed an employee’s last known address and the employer is unsure of how to locate the employee.
Additional COBRA issues may be implicated for employers who have not received a COBRA payment from a former employee. After the statutory grace period for employees to make COBRA payments expires, employers who have not received a COBRA payment from a former employee must decide whether to terminate coverage or opt to extend the period of time for making a COBRA payment.
The Health Insurance Portability and Accountability Act
HIPAA provides that employers qualifying as “covered entities” are required to protect the privacy of an employee’s medical information. In the wake of a natural disaster, officials may contact employers and ask for an employee’s emergency personal health information. Employers covered by HIPAA can share information as necessary to identify, locate, and notify family members, guardians, or anyone else responsible for an employee’s care. When possible, an employer should obtain verbal permission from the employee to share this information. If the employee is incapacitated or not available, employers may share information if doing so is in the employee’s best interest. In addition, when an employer shares information with disaster relief organizations that are authorized by law or by their charters to assist in disaster relief efforts, it is unnecessary to obtain an employee’s permission to share the information if doing so would interfere with the organization’s ability to respond to the emergency.
The Americans with Disabilities Act
Under the ADA, if an employee suffers a qualifying disability as a result of a natural disaster, the employer may need to provide reasonable accommodations for the employee, such as the option to telecommute or work from home. Employers will need to be aware of the circumstances that require reasonable accommodations for qualified disabled employees. Employers must also consider that state anti-discrimination laws may define disability more broadly or impose varying accommodations.
Occupational Safety and Health Administration
In the wake of a natural disaster, OSHA standards require that employers institute procedures to ensure the safety of employees in the workplace. The increased likelihood of workplace safety hazards exposes employers to liability, especially if the work involves cleaning affected areas. Employers who seek to avoid an employee’s claims for damages exceeding worker’s compensation benefits for work-related injuries incurred after a natural disaster should use reasonable care when making and supervising all job assignments. Recovery efforts may implicate OSHA citations for employers failing to comply with OSHA standards.
The National Labor Relations Act
After a disaster, employees’ concerns about workplace safety may implicate issues associated with protected concerted activities, such as a group of qualified employees refusing to work in an unsafe environment. An employer’s right to permanently replace the employees engaging in concerted protected activities or to discipline or discharge the employees may lead to unfair labor practice charges under the NLRA.
Additionally, compelling economic exigencies may provide an exception to the employer’s duty to bargain in good faith with a union over mandatory subjects. The NLRB and arbitrators have provided unionized employers with greater (but not absolute) flexibility to respond unilaterally during a crisis.
The Worker Adjustment and Retraining Notification Act
WARN requires that employers provide a notification period to employees in advance of a covered plant closing or mass layoff. However, if a natural disaster occurs, WARN provides an exception to the notification period and only requires that employers give as much notice to employees as is practicable. Furthermore, to avoid liability, employers will need to establish that the plant closing or mass layoff resulted directly from the natural disaster. An employer’s temporary lay off of employees for less than 6 months with a reasonable expectation of recall does not qualify as a loss of employment, and thus, WARN may not be implicated in many short term shut downs.
Employers who are seeking to relocate staff to the United States after a hurricane or other natural disaster must take into account the restrictive nature of U.S. immigration provisions with reference to individuals who are not U.S. citizens, refugees, asylees, or resident aliens authorized to live indefinitely in the United States. Although some workers may qualify for employment visas in the United States as intra-company transferees (L-1 visa classification) or as professional workers (H-1B visa classification), each of these categories generally require adjudication of petitions and interviews at U.S. Embassies and Consulates before visas may be issued. If a compelling rationale can be established as to the need to urgently transfer individuals, some of these procedures might be expedited.
In the rarest of circumstances, the regular immigration visa system might be circumvented and individuals paroled into the United States on a temporary basis. However, this would generally occur only if there is a specific humanitarian basis justifying the movement of this individual to the United States. Where there has been a major disaster making it difficult, if not impossible, for foreign nationals and non-immigrants to return back to their home country, employees may be classified under a special “temporary protected status.” Any relocation program with an objective to relocate employees into the United States needs careful analysis as to the status of the employees relative to the United States and which U.S. visas may apply to them.
Hurricane Katrina spawned insurance coverage litigation on a broad spectrum of issues relating to property insurance. The issues included the scope of coverage for business interruption, the application of policy exclusions, loss valuation, and other subsidiary issues, such as appraisal rights and claims handling. Precedents involving Hurricane Katrina in courts around the country will provide important context for decisions regarding future natural disaster-related claims.
Hurricane Katrina also demonstrated the potential for involvement of many different kinds of insurance policies. Errors or omissions in insurance policies, such as homeowners, renters, comprehensive liability, and package policies sold to businesses, and even to directors and officers, may implicate natural disaster-related loss issues. Policyholders should review their insurance contracts and understand the scope of coverage available for natural disaster-related loss. Any deficiencies should be identified and if possible rectified before a loss occurs. The obligation to cooperate with the insurance company in connection with claim submission can give rise to complex issues as to which legal advice is advisable.
Despite our hopes and prayers that our friends, families, and clients will be spared the kind of devastation that was caused by Katrina, it is unrealistic to assume that Mother Nature will never attack again. Therefore, after considering the myriad of issues that are implicated by natural disasters, employers should familiarize themselves with the issues specific to their business operations and implement appropriate procedures that will minimize exposure to liability after a natural disaster occurs. As always, if you have any questions about the legal issues implicated by natural disasters, please contact your Proskauer relationship attorney or any of the attorneys listed below.