Employee Relief in the Aftermath of Katrina

Both established and recently enacted laws may offer aid and protection to employees affected by natural disasters such as Hurricane Katrina. Employees affected by natural disasters such as Katrina may be protected under the Americans with Disabilities Act (ADA) if they suffer from a disability as the result of the event, or may be eligible for leave under the Family and Medical Leave Act (FMLA” if they or a family member have suffered a serious health condition as the result of the storm. Additionally, affected employees may be eligible for relief under measures enacted as a direct response to the event, such as the Katrina Emergency Tax Relief Act of 2005 (KETRA), or may seek relief from previously established assistance programs, such as unemployment insurance or the federal Disaster Unemployment Assistance program.

Employee Leave

Employees affected by Hurricane Katrina may be entitled to up to 12 weeks of unpaid leave under FMLA for a serious health condition caused by the hurricane. Additionally, employees who must care for a child, spouse, or parent with a serious medical condition may also be entitled to the same amount of leave under the FMLA. Employees who have been disabled by the effects of Katrina may be protected under the ADA. Although these laws are often discussed, they are worth reviewing here, as Katrina directly affected millions of victims, many of whom were injured in the storm and its aftermath. (Note: although certain states may impose more substantial family and medical leave obligations on employers, the states most heavily affected by the hurricane — Mississippi, Louisiana and Alabama – do not).

The FMLA applies to:

• employees of all public agencies and employees of private companies with 50 or more employees who are each working at least 20 calendar weeks in the current or preceding calendar year; public and private employees must also have worked at least 12 months for the employer and at least 1250 hours during the 12 months immediately before the leave starts; and who
• have a serious health condition or are taking care of a family member who has a serious health condition. The FMLA defines a serious health condition as “an illness, injury, impairment, or physical or mental condition” that involves either inpatient care or continuing treatment by a health care provider.

The ADA applies to employees who suffer from a physical or mental impairment that substantially limits one or more major life activities. Mental impairments are defined as any mental or psychological disorder such as post-traumatic stress disorder, major depression, or panic disorders, all of which could have been brought on by the effects and aftermath of the hurricane.

Employee Assistance

Individuals who have lost their jobs as a result of Hurricane Katrina may apply for regular unemployment insurance benefits (UI) through their state unemployment office, or may be eligible for federal Disaster Unemployment Assistance (DUA).

The Department of Labor's regular UI programs provide unemployment benefits to eligible workers who:

• became unemployed through no fault of their own;
• file a claim with the State Unemployment Insurance Agency as soon as possible;
• meet the state requirements for wages earned or time worked during the one-year period specified by state law;
• meet other state law requirements; and
• register for work.

Unemployment benefits are based on a percentage of the individual's earnings over a recent 52-week period, up to a state maximum amount, and can be paid for a maximum of 26 weeks, with certain exceptions during times of high unemployment. Any monetary relief is subject to Federal tax laws.

However, those whose jobs have been lost or interrupted as a direct result of the hurricane, but who do not qualify for state unemployment benefits — for example, if they have not worked somewhere for at least one year or are self-employed — may be eligible for DUA benefits. Unemployed individuals must register with the state's employment services office to apply for the DUA benefits, which can extend up to 26 weeks after the affected area is declared a disaster area. The deadline for filing claims for DUA benefits in Alabama, Louisiana, and Mississippi was Nov. 30, 2005.

To be eligible for DUA benefits, an individual must be ineligible for regular unemployment benefits, and must be unable to work because the hurricane:

• caused physical damage or destruction to his or her place of business;
• caused a bodily injury;
• resulted in closure of the place of employment by the federal government, rendering the workplace inaccessible; or
• caused the death of the head of household and resulted in the surviving family member becoming the household's breadwinner or major support contributor.

For participants in group health and disability plans who lived or worked in designated disaster areas in Alabama, Louisiana, and Mississippi, and their beneficiaries, certain deadlines and time periods will be disregarded or postponed from Aug. 29, 2005, through Feb. 28, 2006. These include:

• the 30-day deadline for special enrollment rights under the Health Insurance Portability and Accountability Act (HIPAA);
• the 63-day break in coverage period used to determine whether a pre-existing condition limitation will apply under HIPAA;
• the 60-day deadline for electing continuation health benefits coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA);
• the 60-day time period for notifying a plan administrator of an event that would qualify the individual for COBRA continuation coverage; and
• all deadlines for filing claims and appeals under group health and disability plans.

The requirements have also been relaxed for affected individuals who have retirement assets in qualified employer plans, such as 401(k) and 403(b) plans. The type of relief provided by IRS guidance and KETRA includes:

• The normal 10% penalty will be waived for early withdrawals from retirement plans between Aug. 25, 2005, and Dec. 31, 2006, and these distributions will not be subject to the mandatory 20% withholding which normally applies to rollover distributions;
• Plans must extend a 1-year grace period for repayment of any plan loan that an individual is due to pay between Aug. 25, 2005, and Dec. 31, 2006;
• A 401(k) or other qualified plan may allow individuals to take hardship distributions or loans for needs arising from Hurricane Katrina.

For new loans from 401(k) or other qualified plans made between Sept. 23, 2005, and Dec. 31, 2006, the maximum loan amount is increased to 100% of the account balance or $100,000, whichever is less.

Employers should be aware of the various forms of relief and protection to which employees may appeal following a major natural disaster such as Hurricane Katrina. It is important for employers to review not only applicable laws and governmental relief programs, but to review and understand their own policies and the possible application of those policies to employees affected by such an event.

Both established and recently enacted laws may offer aid and protection to employees affected by natural disasters such as Hurricane Katrina. Employees affected by natural disasters such as Katrina may be protected under the Americans with Disabilities Act (ADA) if they suffer from a disability as the result of the event, or may be eligible for leave under the Family and Medical Leave Act (FMLA” if they or a family member have suffered a serious health condition as the result of the storm. Additionally, affected employees may be eligible for relief under measures enacted as a direct response to the event, such as the Katrina Emergency Tax Relief Act of 2005 (KETRA), or may seek relief from previously established assistance programs, such as unemployment insurance or the federal Disaster Unemployment Assistance program.

Employee Leave

Employees affected by Hurricane Katrina may be entitled to up to 12 weeks of unpaid leave under FMLA for a serious health condition caused by the hurricane. Additionally, employees who must care for a child, spouse, or parent with a serious medical condition may also be entitled to the same amount of leave under the FMLA. Employees who have been disabled by the effects of Katrina may be protected under the ADA. Although these laws are often discussed, they are worth reviewing here, as Katrina directly affected millions of victims, many of whom were injured in the storm and its aftermath. (Note: although certain states may impose more substantial family and medical leave obligations on employers, the states most heavily affected by the hurricane — Mississippi, Louisiana and Alabama – do not).

The FMLA applies to:

• employees of all public agencies and employees of private companies with 50 or more employees who are each working at least 20 calendar weeks in the current or preceding calendar year; public and private employees must also have worked at least 12 months for the employer and at least 1250 hours during the 12 months immediately before the leave starts; and who
• have a serious health condition or are taking care of a family member who has a serious health condition. The FMLA defines a serious health condition as “an illness, injury, impairment, or physical or mental condition” that involves either inpatient care or continuing treatment by a health care provider.

The ADA applies to employees who suffer from a physical or mental impairment that substantially limits one or more major life activities. Mental impairments are defined as any mental or psychological disorder such as post-traumatic stress disorder, major depression, or panic disorders, all of which could have been brought on by the effects and aftermath of the hurricane.

Employee Assistance

Individuals who have lost their jobs as a result of Hurricane Katrina may apply for regular unemployment insurance benefits (UI) through their state unemployment office, or may be eligible for federal Disaster Unemployment Assistance (DUA).

The Department of Labor's regular UI programs provide unemployment benefits to eligible workers who:

• became unemployed through no fault of their own;
• file a claim with the State Unemployment Insurance Agency as soon as possible;
• meet the state requirements for wages earned or time worked during the one-year period specified by state law;
• meet other state law requirements; and
• register for work.

Unemployment benefits are based on a percentage of the individual's earnings over a recent 52-week period, up to a state maximum amount, and can be paid for a maximum of 26 weeks, with certain exceptions during times of high unemployment. Any monetary relief is subject to Federal tax laws.

However, those whose jobs have been lost or interrupted as a direct result of the hurricane, but who do not qualify for state unemployment benefits — for example, if they have not worked somewhere for at least one year or are self-employed — may be eligible for DUA benefits. Unemployed individuals must register with the state's employment services office to apply for the DUA benefits, which can extend up to 26 weeks after the affected area is declared a disaster area. The deadline for filing claims for DUA benefits in Alabama, Louisiana, and Mississippi was Nov. 30, 2005.

To be eligible for DUA benefits, an individual must be ineligible for regular unemployment benefits, and must be unable to work because the hurricane:

• caused physical damage or destruction to his or her place of business;
• caused a bodily injury;
• resulted in closure of the place of employment by the federal government, rendering the workplace inaccessible; or
• caused the death of the head of household and resulted in the surviving family member becoming the household's breadwinner or major support contributor.

For participants in group health and disability plans who lived or worked in designated disaster areas in Alabama, Louisiana, and Mississippi, and their beneficiaries, certain deadlines and time periods will be disregarded or postponed from Aug. 29, 2005, through Feb. 28, 2006. These include:

• the 30-day deadline for special enrollment rights under the Health Insurance Portability and Accountability Act (HIPAA);
• the 63-day break in coverage period used to determine whether a pre-existing condition limitation will apply under HIPAA;
• the 60-day deadline for electing continuation health benefits coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA);
• the 60-day time period for notifying a plan administrator of an event that would qualify the individual for COBRA continuation coverage; and
• all deadlines for filing claims and appeals under group health and disability plans.

The requirements have also been relaxed for affected individuals who have retirement assets in qualified employer plans, such as 401(k) and 403(b) plans. The type of relief provided by IRS guidance and KETRA includes:

• The normal 10% penalty will be waived for early withdrawals from retirement plans between Aug. 25, 2005, and Dec. 31, 2006, and these distributions will not be subject to the mandatory 20% withholding which normally applies to rollover distributions;
• Plans must extend a 1-year grace period for repayment of any plan loan that an individual is due to pay between Aug. 25, 2005, and Dec. 31, 2006;
• A 401(k) or other qualified plan may allow individuals to take hardship distributions or loans for needs arising from Hurricane Katrina.

For new loans from 401(k) or other qualified plans made between Sept. 23, 2005, and Dec. 31, 2006, the maximum loan amount is increased to 100% of the account balance or $100,000, whichever is less.

Employers should be aware of the various forms of relief and protection to which employees may appeal following a major natural disaster such as Hurricane Katrina. It is important for employers to review not only applicable laws and governmental relief programs, but to review and understand their own policies and the possible application of those policies to employees affected by such an event.