Should I Continue To Pay My Employees When Operations Are Suspended?

​Employees play a crucial role in a business’s success. And as such, it’s only fair that employees receive just compensation for their tasks that keep business operations going and income flowing. 

But due to unexpected events like a pandemic suspending non-essential operations, theft, or property damage, business owners might find it impossible to resume operations even if employees are willing to work. In such a case, are business owners legally obligated to continue paying their employees even when their business operations are halted?

Exempt vs. Non-Exempt Employees
When dealing with a question like this, it’s important to understand the difference between an exempt employee and a non-exempt employee. 

Exempt employees are those not entitled to overtime pay as according to the Fair Labor Standards Act. Instead of an hourly wage, exempt employees receive a salary or a benefits package instead of overtime pay. Employers have the discretion to offer overtime pay, but they are not obligated to do so. 

Non-exempt employees are those entitled to overtime pay. Most non-exempt employees are paid at least minimum wage, plus overtime pay if they work over 40 hours per week. 

Paying Employees During Business Suspension
In case of an unexpected event that results in their business halting operations (and thus stopping income), businesses have to follow the Fair Labor Standards Act when it comes to payment. 

When it comes to exempt employees, employers are required to pay the employee’s full salary even if the business is closed. However, employers can require their employees to use their allowed leaves to offset the missed business operations. 

Non-exempt employees, on the other hand, may only be paid for the hours they have worked. Therefore, business owners are not required to pay their non-exempt employees if the business suspends its operations. 

Protecting the Employees Essential to Your Business
The Fair Labor Standards Act, however, gives employers the discretion to go beyond the legal requirements. For instance, employers can pay their exempt employees overtime if they find themselves financially capable of doing it. 

Therefore, in case of a disaster or any unexpected reason for the business to halt operations, businesses can continue to pay their employees if they want. This may not be the best financial decision without business income insurance or an emergency fund set aside for this purpose. However, it is an ethical step to take to keep employees financially secure while the business waits to resume operations. 

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