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N.Y. Businesses Still Face Challenges in Sandy’s Aftermath

By Pamela Babcock  11/21/2012
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NEW YORK CITY—Weeks after Hurricane Sandy slammed the New York region, many businesses are navigating a host of challenging business recovery, insurance, HR and legal issues.

“Most people don’t appreciate that in the New York metropolitan area, there is $2.4 trillion dollars of property damage on the coastline,” said Elliott M. Kroll, a partner with Arent Fox, at a Nov. 14, 2012, seminar presented at the law firm’s New York office. “People who aren’t here just don’t really appreciate just how badly this area was hit,” he said.

The hurricane hit the New York City metropolitan region on Oct. 29, 2012. At the height of the storm, an estimated 8 million homes and businesses on the East Coast were without power. In addition to catastrophic damage in coastal towns, parts of lower Manhattan were flooded and the city’s subway system shut down.

The storm also caused major gasoline shortages and crippled major commuter rail lines from New Jersey to New York City. While many affected businesses had disaster preparedness plans in place, in many cases those plans just weren’t enough.

“Enterprise risk management is the beginning and the end,” Kroll told SHRM Online. “You have to have a plan that is comprehensive and effective. God doesn’t think in terms of 100-year storms.”

Many companies had stepped up disaster plans after Hurricane Irene, which hit New York in August 2011, but in many cases, that wasn’t enough.

At the height of Hurricane Sandy, NYU Langone Medical Center in Manhattan was forced to evacuate hundreds of patients after its basement began filling with water and generators failed.

“You can plan all you want and it doesn’t always work out like you expect it to,” said Reginald Odom, Langone’s vice president of labor and employee relations.

Some planning did pay off. The medical center’s emergency plan deems every employee essential, but management understands some can’t get to work during an emergency. Room and meals are provided to employees who opt to stay onsite, and under emergencies deemed “Level 5,” employees get an extra vacation day for each day worked. The medical center also ran payroll in advance of the storm, “to make sure the staff was going to be taken care of,” Odom noted.

Companies that Planned Effectively

Kroll said FedEx, Goldman Sachs and Ford Motor Co. all planned well for Sandy and minimized disruptions.

FedEx has a team of 14 meteorologists and began making contingency plans two weeks before the storm by updating and refreshing employees in areas forecast to be affected on evacuation and contingency plans. The company also made sure that there were sufficient back-up generators, and moved trucks and planes out of harm’s way, he said.

Recognizing that airports would be closed, the company used more ground-based shipping for things that might typically be shipped by air and rented tankers to supply delivery trucks.

Before the storm, Goldman Sachs sandbagged its West Street office in Lower Manhattan, while generators helped keep the lights on. The company also had 1,600 employees in Salt Lake City that could have carried out operations had there been substantial damage, Kroll said.

Meanwhile, Ford Motor Co. gave advance notice to dealers to enable them to move onsite inventory offsite, and asked suppliers in unaffected areas to stock up on certain supplies in case of shortages.

What to Look for in Insurance Providers

Kroll said companies should seek insurance and enterprise risk professionals “who really understand this area and who have an almost tactile feel for it.”

To prevent or minimize disruptions, he advised employers to:

  • Quantify how weather-related events could affect the business.
  • Identify potentially disruptive events as they approach, to provide enough time to avoid or minimize damage.
  • Devote appropriate resources to contingency planning.

In terms of advance planning for contingency operations, companies should:

  • Institute and practice contingency and evacuation plans and make sure employees know what do under those plans.
  • Develop contingency plans for suppliers in vulnerable areas and make arrangements for offsite storage of valuable resources.
  • Diversify contingency operations by making sure backup operations and suppliers aren’t in the same general area.

HR and Legal Considerations

Arent Fox Partner Darrell S. Gay moderated a panel on specific labor issues, during which he offered these recommendations.

Working remotely. Make sure employees are clear on whether they’re allowed to work from home. Employees should provide “real records,” such as signed declarations of hours worked in case the employer gets sued by someone who says, “My boss told me even though I was away from work, I should work and I put in 8 hours a day.”

Relocating operations. Some New York City companies may need to relocate across town, and others to New Jersey or beyond. Employees can refuse to accept a position because their commute is too long, but if an organization fires them, they might be open to a claim for unemployment.

“It’s basically about how significantly you change the terms and conditions of employment,” added panel participant Pico Ben-Amotz, acting general counsel for the New York Department of Labor.

Business interruption insurance and payroll. Some policies cover payroll but have limitations for exempt and nonexempt employees. Kroll noted that business interruption insurance “is not the simplest area to understand” and encouraged employers to have a “face-to-face with their broker to make sure they demonstrate that they are very fluent in the language of business interruption.”

Pamela Babcock is a freelance writer based in the New York City area.

Related Articles:

Keep Your Employees Safe During Disaster Cleanup, SHRM Online Safety & Security, November 2012

Employee Leave Eligibility and Natural Disasters, SHRM Online Benefits, November 2012

Hurricane Sandy Raises Wage and Hour Issues, SHRM Online Legal Issues, November 2012

When Disaster Strikes: Pay, Leave and Related Issues, SHRM Online Compensation, Updated Oct. 31, 2012

Related Resources:

SHRM Online Disaster Prep and Response Resource Page

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