CALL 503.248.1134

200 SW Market Street, Suite 1900
Portland, Oregon 97201

Which Employees Get Paid When Water Contamination Forces Portland Businesses to Close for the Day?

May 27, 2014

By Michael G. McClory

Last Friday the City of Portland issued a Boil Water Notice for all Portland Water Bureau customers and some regional water providers. The notice reported that tests over the preceding three days had repeatedly “confirmed the presence of total coliform and E. coli in routine drinking water samples.” Customers were instructed to “boil all tap water used for drinking, food preparation, tooth brushing and ice for at least one minute” and to discard “[i]ce or any beverages prepared with un-boiled tap water on or after May 20”.

Portland reacted in a number of interesting ways, as shown by the Twitter messages reported by OPB. Here are a few of my favorites (with attribution).

  • “Portlanders resort to drinking beer instead of water during #pdxboil, literally nothing actually changes” (@monkeyhole);

  • “Riot police dispatched as angry Portlanders realize the boil water notice means no cold-brewed coffee” (@AncientPortland); and

  • “Don't drink boiling water! #PDXBOIL” (@ChadWarn).

The water problem also impacted local businesses, especially restaurants. While some of them tossed food, others closed for parts of Friday and Saturday (until the Boil Water Notice was lifted).

All of this had The Bullard Edge anticipating questions about whether employees must be paid when businesses shut down in response to water conditions. This is a similar question to whether employees must be paid for weather-related absences.

According to my colleague Kent Pearson, the answer depends on exempt status. With non-exempt employees, there is no requirement that employers pay for hours not worked. Thus, whether the reason is outside of the employer’s control (like a shutdown forced by drinking water contamination or a snowstorm) or in the employer’s discretion (such as an early shutdown where business is slow), non-exempt employees are not entitled to pay.

On the other hand, with exempt employees in the private sector the rules are more complicated and frequently require that an exempt employee be paid, even when absent, or else risk losing exempt status. The Fair Labor Standards Act is the basis for analysis. The FLSA generally requires that an employer pay an exempt employee his/her full salary for any week in which work is performed, without regard to the number of hours worked during that week.

“An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If an employee is ready, willing and able to work, deductions may not be made for time when work is not available.” 29 CFR §541.602(a).

Nevertheless, there are a few situations in which an employer is permitted to make salary deductions for absences caused by exigent circumstances without jeopardizing the exempt status of employees. (Salary deductions are distinct from leave bank deductions, which the FLSA generally permits.) We discuss each of these situations below.

  • Employer open, exempt employee absent for full day for “personal reasons”: If the employer remains open for business (despite a boil water notice or a patch of bad weather), but an exempt employee is absent from work for a full day (whether by choice or by necessity), then the absence in that situation is considered an absence for “personal reasons” and the employer may reduce his/her salary for each full day absence (caution: a partial day absence only does not enable an employer to reduce wages without affecting exempt status).

  • Employer open, exempt employee absent from work for an entire workweek: Similarly, wage reduction also is permitted where the employer remains open for business for the full workweek, but an exempt employee does not report for work the entire workweek (whether by choice or by necessity). That also is considered an absence for “personal reasons” and the employer is not required to pay any salary for that workweek (caution: if the employee works any part of the workweek, then no deduction is permitted without affecting exempt status).

  • Employer closed for an entire workweek: If the employer closes operations for an entire workweek (due to bad weather, water problems or for other reasons), then even if an exempt employee was ready and willing to work the employer is not required to pay any salary for that workweek (caution: if the employee works any part of the workweek, then regardless of the number of days worked no deduction is permitted without affecting exempt status).

In connection with the Portland water contamination situation, there are few scenarios imaginable where an employer would be able to reduce an exempt employee's salary. For the most part business shutdowns were limited to part of Friday and Saturday. Thus, none of the categories above likely come into play.

The Bullard Edge