With April unofficially “national tornado and storm month,” this is a good time to think about having a policy for handling externally caused shutdowns. Here are things to think about.

If a company opens an hour late because of a storm, should an employer pay employees who show up earlier because they didn't hear the announcement?

What time does the workday end when employees are given the option to go home because an incident such as a gas leak forces evacuation of the building? What if the employer sends them home subject to recall when the facility is safe again?

When an emergency strikes, you may want to pay stay-at-homes, but do you have to?

Compensating employees around facility closings can get tricky. Here are some tips from the compensation manager's best friend for decades, BLR’s Employee Compensation in [Your State].

Plan Ahead

To some degree, questions of payment in a closedown are governed by the Fair Labor Standards Act (FLSA). Many states have statutes covering this issue as well.

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Those requirements should be incorporated into a more comprehensive policy covering the closing of your facilities, including (1) what circumstances will lead to a closing, (2) who makes the decision, (3) how the decision is communicated, and (4) what to do about employee compensation.

Make sure that all employees are notified of the policy, and you won't have any surprises when you do have to close down.

Compensation

As with most compensation questions, the first issue is whether employees are exempt or nonexempt:

  • For nonexempts, the underlying rule of the FLSA is that if they work during an emergency, they must be paid for those hours. This is true even if you told employees to stay home. If they show up and work, they must be paid.

  • The reverse is also true. If they don't work--for example, if you send them home--you don't have to pay them (except for the hours actually worked). Nor, under federal law, are employers required to keep employees working for any specific number of hours or to pay them for hours they were assigned to work but didn't. (Some states do have minimum payment rules.)

  • That's in theory. In practice, employers generally find a way to be more lenient. They may pay a full day even though workers only worked 6 hours because they came late due to bad weather or were sent home early. Or employees may be able to work longer hours another day in the pay period to make up the time.

  • However, if a facility is kept open and employees are merely permitted to leave early, at their option, hourly workers are usually not paid for the time off.

  • If employees show up and are asked to stay until the situation is assessed, they must be paid even if there is nothing for them to do.

  • If employees are sent home subject to recall, the employer may be required to pay for the on-call time in certain circumstances.

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    Exempt Employees

    Exempt employees are generally paid their normal amount if the workday is shortened.

  • Docking or reducing pay of exempt employees scheduled to work, but who do not because of an emergency, may affect the employees’ status of being exempt from overtime, because, by docking, you are treating them like nonexempt employees.

  • Generally, the FLSA permits an employer to make a deduction for a full-day absence for an exempt employee—but only for a full-day absence—when an exempt employee chooses not to report to work due to an emergency. However, if the exempt employee is absent for only part of the day because of the emergency, the employer may not make a deduction from pay.

    In the next issue of the Advisor, we'll look at how to handle hassles related to emergency pay, and we'll look at the resource this advice came from.