The State Is On Fire: What Should Employers Do About Paying Employees?
By Partner Marie Burke Kenny, Leader of Procopio's Labor & Employment Law Practice Group and Member of Procopio's Management Committee
The text pinging in the middle of the night announced that my kids’ school is closed today due to fires in Carlsbad, California. Thankfully, the closure is precautionary and mostly due to air quality. Elsewhere in Southern California, however, the fires continue to rage over 160,000 acres and people are struggling to cope with the significant property losses and other related challenges. I’d like to take a moment, however, and focus on compensation issues that impact employers and employees.
Many employees are forced to miss work due to mandatory evacuations or school closures. Employers in several areas have been asked by civil authorities to shut down operations or to allow employees to stay at home. In some areas, utility interruptions or failures have disrupted business.
Meanwhile, employers face an important question: What are the legal requirements for paying employees who take time off due to the fires?
A number of employers have elected to compensate their employees as if there has been no interruption in operations, while others have yet to decide the best course for their businesses. Regardless, employers are advised to be aware of the rules governing the compensation of employees in these circumstances. The rules for the payment of exempt and non-exempt employees differ significantly. The rules also vary depending on the circumstances surrounding the employee's absence. Let’s review some general rules:
Employers are required to compensate non-exempt employees for all hours worked. If a non-exempt employee does not report to work (regardless of the circumstances), an employer has no legal obligation to pay the employee. Of course, an employer can permit such an employee to use accrued paid time off (PTO) or vacation to cover such absences if consistent with policy.
For those employers who do elect to compensate their non-exempt employees for hours they have not actually worked, care should be taken to designate such compensation in such a way to avoid it being included in any overtime calculation. In addition, if certain non-exempt employees actually did work during these same periods, the employer may wish to address the issue of comparative fairness by paying those employees some additional bonus or gift.
The rules are different when non-exempt employees actually report to work and are not put to work or are provided with less than half their usual scheduled day's work. In that situation, "reporting time pay" may be required. There are exceptions; an employer is not required to pay employees for "reporting time" when:
- The employer's operations cannot commence or continue due to threats to employees or property; or
- The employer's operations cannot commence or continue when recommended by civil authorities; or
- Public utilities fail to supply electricity, water or gas; or
- There is a failure in the public utilities or sewer system; or
- The interruption of work is caused by an Act of God or other cause not within the employer's control.
For example, if a non-exempt employee actually reports to work and is sent home because there is no electricity or the employer's operations are shut down at the request of civil authorities, an employer has no obligation to pay the employee for "reporting time." On the other hand, if a non-exempt employee reports to work and is sent home because the employer independently wants the employee to be with his/her family, the employer may have an obligation to pay "reporting time." Specifically, the employee must be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay.
An employee who is classified as exempt under one of California's white collar exemptions must earn a monthly salary of no less than two (2) times the state minimum wage for full-time employment. The salary requirement is a minimum standard which cannot be undercut by an action initiated by an employer (e.g., a shutdown). Thus, employers should exercise caution and keep the following rules in mind when making decisions regarding salary deductions for exempt employees:
- If an employer shuts down its operations for a full workweek due to the fires, the employer does not have to pay an exempt employee for that week, provided the employee still earns a minimum monthly salary (i.e., two times the minimum wage). In this situation, the employer cannot require an exempt employee to use PTO or accrued vacation because the employer could not provide ninety (90) days’ notice to the employee (as required by the California Division of Labor Standards Enforcement).
- If an exempt employee voluntarily absents himself or herself from work for a full workweek for personal reasons, the employer does not have to pay an exempt employee for that week, provided the employee still earns the minimum monthly salary. In this situation, the employer may require an exempt employee to use PTO or accrued vacation.
- If an employer shuts down its operations for less than a full workweek and the exempt employee performs any amount of work during that workweek, an employer may not make deductions from an exempt employee's salary.
- If an exempt employee chooses not to work or is unable to come to work (not due to employer direction) for a full day, an employer may require an exempt employee to use PTO or accrued vacation for that day, provided that the exempt employee performs no work of any kind during that day.
- If an exempt employee chooses not to work or is unable to come to work for a partial day, an employer may require an exempt employee to use PTO or accrued vacation for that partial day provided that (1) the employer has adopted a written policy which states that exempt employees will be required to use PTO or accrued vacation for partial day absences, and (2) the employer does not charge their exempt employees’ PTO or vacation leave accounts for partial day absences of less than four hours.
If you have questions about compensating employees during fires or other emergencies, please contact Marie Burke Kenny at 619.525.3876 or email@example.com, or any member of the firm’s Labor and Employment Group.
Marie Burke Kenny is a Partner at Procopio and the Leader of the Labor and Employment Law practice group. She also serves on Procopio's Management Committee. She represents employers in wage and hour class actions and litigation involving wrongful termination, discrimination, harassment, retaliation and unfair competition claims.