Coronavirus (COVID-19), HR Management & Compliance

Ask the Expert: Furloughing Employees Due to COVID-19

Q. What considerations should we be aware of when furloughing employees due to COVID-19?furlough

A. NOTE: Because of the continually changing state and federal directives related to COVID-19, the employer should discuss this matter with its local labor law attorney before taking any adverse action against its employees.

Any type of letter or paperwork related to a furlough or temporary layoff should be created and/or reviewed by the employer’s labor law attorney to ensure it covers information specific to the employer and to ensure compliance with any applicable federal, state, and local laws.

However, we can provide some guidance on elements that a COVID-19 furlough should address. (Note, too, that we are assuming any furlough is not covered by a collective bargaining agreement or other contract.) Generally, a furlough and the notice provided to employees should explain what a furlough is, as many employees may not be familiar with the term.

Simply stated, a furlough is a temporary, short-term, unpaid leave of absence initiated by the employer. Employees typically are not terminated during the furlough, though they may be eligible for unemployment compensation as a reduction in hours.

Most states allow employees to collect at least partial unemployment compensation benefits during the furlough (depending on the furlough period), and many states are beginning to provide additional benefits and waiving waiting periods as a response to COVID-19. The employer should check all federal, state, and local laws to determine the extent of the benefits provided during the furlough.

First, an employer should provide a brief explanation to its employees concerning why the furlough is needed. For example, the employer should explain the impact of COVID-19 on the employer’s business, including any government restrictions affecting the business if the employer is using the furlough to avoid broader layoffs/terminations, and the hope that this will help the business remain viable.

This type of information can help employees understand why they will not be able to work and receive pay during this period and the hardship that the entire business is going through. The employer’s explanation also should designate the approximate length of the furlough period if the employer can, but the employer should not promise a definite return, as the period may be in flux depending on COVID-19 outbreaks and government restrictions.

Second, the employer should also consider whether furloughed employees will be able to or required to use any accrued vacation or paid time off (PTO) before going on unpaid temporary layoff status. Most employers allow the use of any paid time to provide some pay to employees. Note that nonexempt employees (those who must be paid at least the minimum wage for all hours worked, as well as overtime for hours worked over 40 in a single workweek) do not have to be paid if they do not perform any work and generally are allowed to use their paid time during the furlough.

Exempt employees must be treated differently. Under the Fair Labor Standards Act (FLSA), exempt employees must be paid the same salary each week that they perform any work, regardless of the quality or quantity of their work. Furthermore, deductions cannot be made from an exempt employee’s salary for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing, and able to work, deductions may not be made for time when work is not available. However, payment usually is not required if the employee does not perform any work during the entire week. See 29 C.F.R. §541.602(a).

So, for example, if an employer chooses to begin a temporary layoff midweek, it will have to pay exempt employees for the entire week. However, the employer likely can require exempt employees to use any accrued paid time to offset a partial workweek, but if an exempt employee does not have any PTO available, the employer must provide the employee with pay for the whole week. If the employer places an exempt employee on temporary layoff for the entire week, the employee does not have to be paid for that week.

Third, an employer should be able to provide employees with information on health insurance benefits if they are impacted by the temporary layoff. Some employers will continue to pay for health benefits during this type of reduced work period, while others may offer Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage (or any state-provided mini-COBRA if the employer has fewer than 20 employees and is not covered by the federal COBRA) to allow affected employees and qualified beneficiaries to continue health insurance benefits at their own expense.

Under COBRA, employers that provide “group health plans” must offer continuation coverage to “qualified beneficiaries” who have lost health coverage as a result of certain “qualifying events.” COBRA does not require that employers pay for the continuation coverage, only that they offer it to qualified beneficiaries. A temporary layoff generally is considered a qualifying event under COBRA as a reduction in hours if the reduced work schedule takes the employee below the normal threshold for coverage, so it would be appropriate to offer employees and their beneficiaries COBRA coverage while on the reduced work schedule. See 26 C.F.R. §54.4980B-4 (Q&A-1(e)).

Fourth, an employer may further suggest that employees may want to file for unemployment compensation during any unpaid temporary layoff and provide information to contact the state unemployment compensation agency.

Most states allow employees to collect at least partial unemployment compensation benefits during an unpaid temporary layoff, and many states are beginning to provide additional benefits and are waiving waiting periods as a response to COVID-19. The employer should check federal, state, and local law to determine the extent of the benefits provided during the furlough.

Finally, employers should consider sending all furloughed employees a letter outlining the items discussed above and end with a statement indicating that the employer appreciates the employees’ service and provide contact information for questions.

In addition, if the furlough is going to be longer term, there may be state and federal Worker Adjustment and Retraining Notification (WARN) Act requirements the employer must follow. (The WARN Act requires certain employers to provide 60 calendar days’ advance notice, in writing, of layoffs that will cause an employment loss during any 30-day period (1) for one-third of the workforce and at least 50 employees at a single worksite or (2) for 500 or more employees (regardless of whether this constitutes one-third of the workforce) at a single worksite, excluding part-time employees (defined as employees employed for an average of fewer than 20 hours per week or for fewer than 6 of the 12 months preceding the date notice is required, including workers who work full time).)

FINAL NOTE: You should consult with your local labor law attorney before implementing a furlough and have that attorney review any correspondence related to a furlough before distribution to ensure it provides accurate and compliant information because the COVID-19 situation is changing quickly.

Jeanna Crocker Jeanna E. Crocker, Legal Content Specialist, has more than 10 years’ experience in legal research and writing. She currently edits the Family and Medical Leave Handbook and the Leave and Disability Coordination Handbook. Ms. Crocker is also responsible for researching, updating, and maintaining information concerning the Family and Medical Leave Act (FMLA), paid sick leave, discipline and termination, and violence in the workplace.

Ms. Crocker formerly worked as an associate in training at a private firm where she focused on medical malpractice and other forms of civil defense in Buffalo, New York. She received her bachelor’s and master’s degrees from The University of Alabama, Tuscaloosa, and her law degree from the State University of New York at Buffalo Law School.

Questions? Comments? Contact Jeanna at JCrocker@blr.com for more information on this topic