Ask the Expert: Furloughing Employees Due to COVID-19

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

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 work week, 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 a temporary layoff for the entire week, the employee does not have to be paid for that week.

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Source: HR Daily Advisor

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