During the Covid-19 crisis, we are having to close some programs, hopefully temporarily. I need your help understanding the difference between a layoff and a furlough.
Sheltering-in-Place, but Challenged
These are indeed challenging times for all staff—including all the hard-working Human Resources professionals who are now managing remote workers and essential workers with Covid-19 related safety concerns. Due to closures, HR staff must also determine how to categorize workers who are temporarily or permanently unable to work. To make it more complex, no one knows how long these closures will last, requiring managers to draft multiple contingency plans. So, whether you categorize the loss of workhours as a furlough or a layoff depends whether the closure is temporary or permanent as well as whether staff can work some hours or none at all.
The term “furlough” does not appear in any employment laws, but is a commonly used term in the military for a full-time leave of absence. It is also commonly used by some employers who temporarily reduce their staff’s work schedules due to budget cuts. If your nonprofit wants to place staff on temporary loss of hours, either full or part time, you can choose to call it a furlough. However, you can also call that a temporary part- or full-time layoff. Either works.
What employees want to know, and what employer’s need to be clear about when reducing staffing or schedules is what benefits employees will be receiving, if any, during the period of furlough or temporary layoff. For this reason, notice of layoff or furlough should be in writing and include the following information: whether it is full or an hours reduction, when employees can expect their last paycheck if it is a full loss of employment for an indefinite period of time, the status of their employer-provided benefits, notice of their right to file for unemployment benefits, and identification of the preferred communication channel to keep in touch about returning to work.
Benefits During Furlough or Layoff
Some states, most notably California, require employees who are fully laid-off for more than one pay period to be paid all wages owed and require payout of accrued leave (PTO or vacation on the final day of work). Check with your state Department of Labor or Employment to determine the appropriate timing for final payment if workers are taken off the schedule indefinitely.
Eligibility for benefits such as health insurance and legally-mandated and employer paid leave accrual are typically based on hours worked. If your furlough or layoff changes the number of hours an employee works, you’ll need to determine if the employee will still meet eligibility for those benefits based on the temporary reduction in hours—or will the employer change the “hours worked” requirement for benefits eligibility temporarily for the duration of the shelter-in-place orders?
Remember to consult with your employee benefits insurance broker regarding any changes in eligibility for medical, retirement, or other ERISA plans, as changes to those plans are in many instances restricted by the plan terms or the law. If an employee loses employer paid health coverage, a COBRA notice will need to be sent, which will allow the employee to choose to self-pay premiums to ensure continued coverage. Check with your insurance broker if you have questions on who sends the notice.
Eligibility for unemployment benefits is also impacted when an employee has their hours involuntarily reduced partially or fully. With many states eliminating the waiting period for unemployment benefits during this Covid-19 situation, laid-off or furloughed employees may apply immediately for unemployment benefits. Benefits are generally available whether it is an hour’s reduction or no work hours at all, as long as the loss is sufficient to meet the state’s minimum amount of lost wages. With the federal CARES Act supplementing state unemployment systems, state implementation may differ slightly, so check your state’s unemployment system for further details.
The CARES Act requires employers to give employees notice of their right to file for unemployment benefits. Most states have Covid-19 specific websites for further information. Some states, for example, Oregon, have expanded the eligibility criteria for unemployment benefits and allow unemployment benefits for staff who are unable to work due to their own Covid-19 related isolation/quarantine, need to care for a family member with or exposed to Covid-19, or because their minor children are home needing care due to school or childcare closures.
Nonprofits with less than 500 employees are covered by the new Families First Coronavirus Response Act (FFCRA) which provides paid leave to eligible non-exempt employees in certain Covid-19 related circumstances. An employee who is laid-off or furloughed is not eligible for FFCRA leaves for hours in which they are not scheduled to work due to furlough or layoff. You can find more information on the FFCRA through the federal Department of Labor website.
Whether you decide to furlough or layoff workers, if you want to retain the ability to bring them back at the end of this crisis, it is key to set up an effective mechanism to stay in touch with workers. This could include a number they can call for a recorded message or regular emails sent to all laid-off staff from your HR Department or Executive Director. Make sure you have current contact information so employees can be alerted to any changes in the expected return date.
Return to Work
If your nonprofit applied for and received a Payroll Protection Program forgivable loan under the CARES Act, you can “recall” workers from layoff and continue their pay. Alternatively, when the shelter-in-place is lifted or modified, workers can be recalled to work. Either way, remember to recall employees based on business reasons to avoid future discrimination claims. Hopefully, with good planning and communication, your nonprofit will be able to immediately return to is normal staffing when this crisis abates. What the new “normal” is, however, is anyone’s guess.
Be well and wash your hands.
This article does not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel.
Ellen Aldridge, J.D. is an Employment Risk Manager for Nonprofits Insurance Alliance (NIA). Ellen has practiced labor and employment law for over 30 years as a litigator, negotiator, and adviser. Now in her 12th year with NIA, Ellen brings her experience to assist nonprofits in managing employment law risks and implementing best practices to motivate and support employees. Ellen received her B.A. in Government from University of San Francisco and her J.D. from Santa Clara University. On the weekends, you can find her in her garden.