Keeping Your Company Afloat after Flood, Oil Spill, Hurricane, or Terrorism

This year’s “perfect storm” of events — from terrorism in Times Square to the dreaded 1,000-year flood in Tennessee to the devastating oil spill off the Gulf Coast — should again remind employers of the need to establish a crisis management and business continuity plan (CMBCP). The time for corporate complacency is long gone.

Workplace Catastrophes: An Employer’s Guide to Workplace Violence, Terrorism, and Natural Disasters

Six types of disasters in 2010
Alert HR “storm trackers” have noticed at least six different types of disasters dominating the news for much of the past few months:

1. Terrorism. On May 1, an attempt to detonate a car bomb among swarms of humanity in Times Square was fortunately unsuccessful.
2. Human error. Problems on the Deepwater Horizon oil-drilling platform on April 20 resulted in 11 fatalities and an ongoing daily release of at least 210,000 barrels of crude oil into the Gulf of Mexico off the coasts of Louisiana, Mississippi, Alabama, and Florida.
3. Natural disasters. On May 1 and May 2, unprecedented torrential storms caused unfathomable flooding and damage to Middle Tennessee.
4. Domino effect. Catastrophic events at one location can spread and generate disastrous results for employers operating at distant locations. Case in point: The damaging spread of oil from the Deepwater Horizon disaster has affected the fishing and tourism industries in multiple states. Some fear that storms and currents could carry the oil around the southern tip of Florida and deposit it along the East Coast as far north as Cape Hatteras, North Carolina.
5. Double whammy. Damage from one disaster can overlap or join with a different and intervening disaster to amplify the extent of the destruction. This hasn’t happened yet (at the time of this writing), but observers fear the worst if this season’s dire hurricane predictions come true and gigantic storms blow through the Gulf, roiling the oil-contaminated waters. In addition to interrupting efforts to stop and clean up the spill, a tropical storm or hurricane could push oil-soaked waves ashore, perhaps coating areas far inland.
6. Workplace violence. All types of workplace violence continue to occur daily. While 18 percent of all violent U.S. crimes occur in workplaces, thousands of similar incidents are believed to go unreported.

No employer can truly claim that it faces no threat from one or more of these various types of disasters. Nonetheless, the level of complacency remains high among private-sector employers. Many have neglected to design or implement plans to manage crises, protect their employees, and enhance the probability of their business’ recovery and restoration of operations.

State-by-state comparison of 50 employment laws in 50 states

‘It won’t happen here’
In defense of employers, many of you did take action after the horrific terrorist attacks of 9/11. Immediately after the attacks, there was a flurry of activity to put preventive and security-related plans, procedures, and hardware in place. Yet within 18 months, data show that many companies slacked off, reverting to a more lackadaisical attitude about the need for a CMBCP. Part of the blame can rest on the continued absence of any federal legislation requiring all private-sector employers to implement preparedness plans. Many companies also defended their wait-and-see approach with refrains such as:

• “It won’t happen here.”
• “If they want to do it, nothing can stop them.”
• “Our time and money are better spent on higher-priority issues.”
• “Those things only happen in big cities.”
• “We don’t think we’re required to.”
• “We have insurance.”

Nearly four years later, however, the need for employers to commit to a CMBCP was once again hammered home dramatically. Hurricane Katrina, termed the worst natural disaster in American history, affected business, government, and communications over a 31-state area. The 2005 storm exposed the virtual absence of disaster preparedness by both the private and public sectors. Katrina, like 9/11, should have changed the views of both sectors about the necessity of preparedness planning.

No more heads in the sand
The highly respected 9/11 Commission concluded: “Private sector preparedness is not a luxury. It is the cost of doing business in the post-9/11 world.” The group also suggested that failure to engage in planning is tantamount to negligence and endorsed a preparedness standard (NFPA 1600) to be adopted by all private-sector employers. Here are some other legal reasons you should consider creating a CMBCP:

• Boards of directors can be liable for inadequate performance of their fiduciary responsibilities or failure to exercise the proper duty of care. Also, they can face negligence claims for failing to eliminate or mitigate risk of harm to employees, shareholders, vendors, customers, and others.
• The Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission require employers to identify risks and establish controls.
• Injured parties could sue under common-law theories of negligence for damages allegedly caused by a business’ breach of disaster-related duties, such as not properly planning for disasters, failing to check references or properly hire, train, and supervise employees, and failing to maintain safe premises. Other theories include allegations of gross negligence and negligent infliction of emotional distress.
• Common-law tort (personal injury) theories also could be raised, including invasion of privacy due to improper searches, surveillance, and reference checking.
• Employees may file workers’ compensation claims for injuries arising out of or in the course of their work during and after a disaster.
• Disasters can trigger claims under a matrix of federal labor and employment laws — everything from the Occupational Safety and Health Act (OSHA) to COBRA to the Fair Labor Standards Act (FLSA) and even a variety of immigration laws.

Employers also gain a lot of practical benefits by having a CMBCP. In addition to enhancing the probability that your business will survive and recover, you increase the odds that your employees will return to work and economic stability. You also provide added value to shareholders by demonstrating your willingness to take meaningful steps to protect their investments, gain a potential competitive advantage over similar companies that aren’t prepared, and establish your business as a valued corporate citizen, ready to operate at all times, even under crisis conditions.

Bottom line
If 9/11 and Katrina weren’t enough, recent events have removed any grounds for complacency to undertake a CMBCP. Moreover, numerous potential legal liabilities that could develop before, during, and after a disaster may be mitigated or eliminated by well-thought-out preparedness plans. Finally, having a CMBCP benefits the corporation or business by enhancing the chances of continuing to exist after the disaster, gaining potential competitive advantages during and after the event, and providing reassurances to shareholders that their investments are being protected. Those reasons should remove any reluctance to embrace and implement a plan.