Disaster Recovery Isn’t a 9 – 5 Job – Restoration Contractors Who Pay Like It Is Should Expect a Costly Cleanup Bill of Their Own

By Marty Frenkel and Brian Nettleingham

The destruction wrought by a hurricane, wildfire, flood, or other natural disaster can happen in an instant. Property owners and others victimized by these catastrophes learn quickly that recovery is a far, far longer process. As drawn-out as full recovery is, the response required in a disaster’s immediate aftermath requires a rapid mobilization of thousands of restoration workers called up on short notice to gut buildings, string power lines, and haul debris in punishing conditions.

For restoration companies, the complicated logistics of hiring and flooding these workers into the disaster zone are equally frantic and fast-paced endeavors. The economics of that surge are equally unforgiving: scores of large crews – onboarded in a matter of hours and days – working twelve-hour days, six or seven days a week, often for weeks on end. For the restoration companies that employ these workers, this short window between hiring and the accumulation of thousands of overtime hours can create a perfect storm of wage-and-hour liability that results in an extremely expensive cleanup in its own right.

The Fair Labor Standards Act’s (FLSA) rule is deceptively simple: non-exempt workers must be paid one and one-half times their regular rate for every hour over forty in a workweek. But the controlled chaos of disaster response is where that simple rule most often breaks down, and where shortcuts such as cash payments have led the U.S. Department of Labor (DOL) and the plaintiffs’ bar to concentrate their litigation attention as disasters come at an increasingly frequent pace and with increasingly destructive power.

Three recent matters, spanning disasters in Texas, Puerto Rico, and California, illustrate how the same fact pattern recurs across jurisdictions, events, and claim types.

Hurricane Ida: Cash Payments and No Overtime After the Storm

In In re All Repair and Restoration d/b/a All Day USA / Joe Saavedra, litigated in Houston’s Fourteenth Court of Appeals, remediation workers from Texas who were called upon after 2021’s Hurricane Ida alleged systematic FLSA violations built around two practices that frequently accompany each other in post-disaster scenarios: paying workers in cash, off the books, and paying no overtime premium for the long hours the job demanded.

These transgressions are familiar ones to the DOL’s Wage and Hour Division. In Fiscal Year 2025 alone, the division recovered $146,377,245 in back wages and penalties for overtime violations.

Off-the-books cash payments can expose employers to compounding problems because, as the name implies, they typically lack accurate records of hours worked. These practices can result not only in unpaid overtime liability but also in independent recordkeeping violations. Because the FLSA presumes the employee’s reasonable estimate of hours worked is accurate when the employer’s records are inadequate or non-existent, the amount that employers may be liable for in back wages may far exceed the amount due for actual hours worked.

The Texas matter is a reminder that surge staffing is, as industry observers have noted, the sector’s single biggest wage-and-hour landmine.

Hurricane Maria: Willful Overtime Violations in Puerto Rico

To err may be human, but to willfully violate the FLSA’s overtime pay requirements is disastrous. Puerto Rico’s grid restoration after Hurricane Maria produced the most consequential wage litigation involving the restoration industry. In Mammoth Energy Services v. Summers and the related federal action Cantu v. Mammoth Energy Services, electrical workers who restored power after the storm pursued unpaid overtime claims under the FLSA.

The workers in the former case prevailed in arbitration: the arbitrator found that the employer’s pay plan willfully violated the FLSA. The plaintiffs in the latter action — 145 former utility restoration workers employed from 2017 to 2019 — moved to bind the company to that arbitration finding through collateral estoppel, arguing that they performed identical work under the same payroll policies. The stakes were not theoretical: more than $14 million in back pay has been recovered for workers doing storm repair and cleanup in Puerto Rico and the United States. A willfulness finding matters because it extends the FLSA’s limitations period from two years to three and reinforces the availability of liquidated damages equal to the unpaid wages.

California: It’s Not Just the Feds Who Can Burn You for OT Violations

The risk of liability for overtime pay violations doesn’t just come from Washington, DC. State wage and hour laws, and often more-aggressive enforcement postures at the state level, represent a whole other level of exposure, especially for restorations that extend across state lines.

A representative example of state-level overtime liability arose out of the October 2017 Tubbs Fire in Northern California. In a class action filed in Sonoma County Superior Court, Napa-area fire-restoration workers alleged that a Fort Worth–based restoration company failed to pay overtime at one and one-half times the regular rate for hours worked over forty, in violation of California wage-and-hour law.

Workers described gathering in parking lots across Sonoma and Napa counties, from which they were transported into the field to perform fire cleanup. The claim is, at its core, an overtime claim: the failure to pay the required premium for long weeks in the burn zone. California’s overtime protections are among the most demanding in the country, and a company operating far from its home base learned quickly (and expensively) that it must comply with the wage-and-hour law of the state where the work is performed, not the state where it is headquartered.

An Overtime Violation by Any Other Name Is Still an Overtime Violation

What’s in a name? Nothing to regulators who don’t care what an employer calls a wage practice if it is, in fact and substance, an overtime violation. Across all three matters discussed above, the mechanism of the violation is strikingly consistent, and it is exactly the mechanism the Department of Labor has flagged.

The Wage and Hour Division’s Disaster Recovery toolkit repeatedly warns that day-rate and employer-labeled “high hourly rate” framework used by cleanup employers and staffing agencies are typically overtime violations. Enforcement history bears this out. In Puerto Rico alone, DOL recovered $5,579,939 for 993 employees at nine power-restoration subcontractors that paid flat rates regardless of hours worked, and $1,341,829 from a single San Juan contractor for overlapping violations of the FLSA, the Service Contract Act, and the CWHSSA. After Hurricane Katrina, DOL secured $1 million for 154 workers who had been paid straight time only for weeks that ran as long as 84 hours.

Importantly, day rates do not cease to be day rates simply because the cumulative amount of pay is large enough to exclude a worker from entitlement to overtime pay if that sum were a salary instead. In Helix Energy Solutions Group, Inc. v. Hewitt, the U.S. Supreme Court held that even a worker earning more than $200,000 a year was entitled to overtime pay because a day rate does not satisfy the salary-basis test for exemption. As Justice Kagan, writing for the Court, succinctly put it: “The question here is whether a high-earning employee is compensated on a ‘salary basis’ when his paycheck is based solely on a daily rate… We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay.”

For an industry that runs on day rates, that holding is a direct hit.

Overtime Compliance Takeaways for Disaster Recovery Operations

For any company that mobilizes crews after a catastrophe, there are three key takeaways from these cases:

• A day rate, a flat rate, or an attractive “all-in” hourly figure does not eliminate the overtime obligation; if the arrangement does not deliver a true time-and-a-half premium for hours over 40, it is likely a violation.
• Cash pay and thin records may cut some corners, but they do not cut the risk of liability. Quite the opposite, actually, as such practices add recordkeeping liability and invite willfulness findings that triple the look-back period.
• Geography controls: Crews deployed to California, Puerto Rico, or Texas are covered by the state wage law in the state where they work, and such laws are often more generous to employees than federal law. Multi-state deployment also entails multi-state compliance, adding another layer of complexity for restoration companies that must rapidly staff up in the aftermath of a disaster.

When the storm passes, the overtime bill comes due, and, as these cases show, that bill can dramatically and negatively change the economics of disaster recovery operations for restoration companies. Legal and administrative resources should therefore be brought to bear as soon as possible to reduce the risk of significant liability for unpaid overtime.