Natural Disasters and the Employer’s Duty to Pay Employees

Recent natural disasters such as Hurricane Katrina and fears of a potentially devastating earthquake or levee break in California have left employers wondering whether they would be required to pay their employees during a temporary closure caused by a natural disaster. The answer varies for exempt and non-exempt employees.

Under the federal Fair Labor Standards Act (FLSA), non-exempt employees need not be paid for hours not worked. If a natural disaster prevents non-exempt employees from reporting to work or there is no work to report for, the non-exempt employees do not get paid. The exception to this is if there is a labor contract in place between the employer and employee or labor union providing that the employees will be paid notwithstanding the natural disaster.

The situation is different for exempt employees. The FLSA suggests that exempt employees must be paid even during temporary closures caused by natural disasters. The FLSA makes clear that if an exempt employee is ready, willing, and able to work, an employer cannot make deductions from her pay even when work is not available. The prohibition against deductions is subject to a few listed exceptions, but interruption of work due to a natural disaster is not one of them.

In California, the Division of Labor Standards Enforcement (DLSE) has stated that when work is interrupted by an “Act of God” or other cause not within the employer’s control, there is no obligation to pay employees. The DLSE’s Enforcement Policies and Interpretations Manual does not distinguish between exempt and non-exempt employees. However, the DLSE Manual is intended for internal use only and has no official authority. The opinion of the DLSE is not entitled to a great deal of deference if its interpretation and/or decision is invoked in a court proceeding.

When California and federal labor laws are not in harmony, the courts will apply the law that is most favorable to the employee. The issue of whether an employer needs to pay employees during a natural disaster has not been litigated in California, and the DLSE interpretation of California law appears to favor employers. As such, the federal law would likely be applied, and employers would probably be liable for wages to exempt employees but not non-exempt employees.