Furloughs are in the news, from Macy’s announcing a furlough of a “majority” of its 130,000 workforce, to United Airlines furloughing one-third of its workforce, to the USCIS announcing the furlough of over 13,000 agents for 30-90 days.
The commonly held notion of a “furlough” is that an employee or group of employees are made to stop work for a period of time, usually to be called back after the circumstances causing the furlough have been resolved. Furloughed employees have a job, but no pay, just the expectation that they will be called back.
The newest wrinkle on the furlough is the “one day per week” furlough, or the requirement to “take X days furlough between now and year end.” This approach has been used by private employers as well as several cities, governmental agencies and educational institutions. In this scenario, the employee is either required to take a certain number of hours off per week, or to take a total number of days off during a certain time period. Less than a 20% reduction in hours is generally not sufficient for the employee to claim unemployment compensation, so this can be attractive to employers. Unemployment compensation laws differ from state to state.
Furloughs are a quick way for companies to address a cash crisis, especially in industries where employee wages and benefits can account for 70% of their operating costs. Furloughs are generally less expensive for companies than layoffs and terminations because the employer does not have to pay salaries, yet does not have the expenses of termination, such as mandatory notices, severance, outplacement, risk of law suits, etc. When conditions improve, the employer can bring back the same staff without having to recruit, hire, and train new employees.
A few furlough facts:
- Employees can collect unemployment insurance payments during a furlough.
- Health care may or may not be continued, depending on the employer’s policy. Some employers require a minimum number of work hours to qualify for medical coverage.
- If health care coverage is continued, the employee must continue to pay their share of the coverage, which normally would be deducted from pay.
- If you do lose health care coverage, your employer may be required to offer COBRA benefits.
- Some industries regularly furlough employees, such as seasonal businesses, businesses which shut down for maintenance on a regular schedule, etc.
- Salaried personnel can be furloughed and receive no pay, but if they do any work at all, even an hour or two, they must receive their regular salary for the week.
- Furloughs must be implemented neutrally and cannot be used as a pretense for employment discrimination.
- Injured workers who are on workman’s compensation are often entitled to preferred treatment under state law.
If you are concerned that your furlough has not been correctly handled, especially if it affects a number of employees in the same situation, you should act promptly to seek advice. This is important both in order stop the unfair activity, and because employment protection laws have strict filing deadlines which could bar your claim. Pelton Graham is here to help.