Tips for Nonprofits: Surviving Government Shutdowns

Article Highlights:

• Some thoughts and recommendations to help your nonprofit weather the government shutdown.
• Access Programs & Loans to Avoid Layoffs & Furloughs
• How to Navigate a Furlough
• Temporary Vs. Permanent Layoffs
• Tips for Graceful Layoffs
• Plan for the Future

Some thoughts and recommendations to help your nonprofit weather the government shutdown.

The government shutdown is resulting in a severe funding shortfall for many nonprofits, both large and small, which is forcing many organizations to consider furloughs, decreased pay, and even layoffs. How can you determine your best and least painful options to navigate these troubled times?

Unfortunately, government shutdowns have a huge impact on the stability of nonprofits, especially those that depend on federal funding. Nonprofit services and programs can be stretched to the absolute limits during a time like this, so please know your nonprofit isn’t alone!

Here are some thoughts and recommendations to help you weather the shutdown:

Access Programs & Loans to Avoid Layoffs & Furloughs

Many states have work sharing programs that can help you avoid furloughs by offering financial support and flexibility. In California for example, the EDD provides a Work Sharing Program that allows employers to reduce everyone’s pay a certain percentage. The employees affected then receive partial unemployment insurance benefits for the reduction in pay.

Even a modest amount of cash can delay layoffs or furloughs, at least for a while, so be sure to check to see whether there are resources available in your state. Just be sure that before taking the tough step of reducing salaries, you first review employment contracts to ensure that won’t alter exempt and non-exempt statuses.

And if you decide to explore a furlough, consult state laws to see how it affects the exempt vs. non- exempt status of employees, as there may be both federal and state authority that permits reduction of salary during a furlough. For states without their own exempt salary laws, consult the Federal Fair Labor Standards Act for how the furlough affects exempt status.

In addition to state programs, a range of other support resources also exists. For example, the Nonprofits Insurance Alliance of California offers a short-term loan to members to cover expenses during trying times like these, and other revolving nonprofit loan funds can be found via online searches or providers like Community Capital Advisors.

How to Navigate a Furlough

A furlough—specified unpaid leave—effectively shifts a full-time position to a part-time one for non-exempt staff. It’s typical that employees choose which days they would like to use for a furlough. When implementing furloughs, be sure to clarify whether employees can expect to continue accruing vacation time and receiving benefits at full-time levels; it is common practice to allow this. However, taking a furlough on a holiday typically means the employee will not be paid for the holiday.

Remind employees with garnished wages or child support deductions that these amounts may be affected. Be mindful that international staff on H1-B visas may be required to work a certain number of hours a week to maintain eligibility to work in the United States.

Exempt employees who have worked any day of a single week cannot be paid less than a full week, so while furloughs don’t reduce payroll costs for exempt staff, reducing the full-time salaries of these employees by 20% might be a viable option. In California, DOL and DLSE opinions recognize an employer’s right to reduce exempt employees’ pay due to a furlough, in which the employer can reduce pay to 4/5th time and still preserve exempt status, and similar solutions may be permitted in other states with their own exempt salary laws.

A nonprofit saving on both exempt and non-exempt payroll could shut down during a slow week (such as one with a federal holiday). Remind exempt employees not to work that week to avoid triggering a legal pay requirement for the full week, and give employees the option to use accrued vacation pay during the shutdown.

Temporary Vs. Permanent Layoffs

If you need to resort to layoffs, it’s critical to double check to make sure employees marked for layoff aren’t on protected leave, such as workers’ compensation, family or medical, or pregnancy disability leave. It’s a good idea to check with HR or a labor law attorney about these employees.

To avoid discrimination claims, it’s also important to check past performance evaluations and document how the difficult decisions to lay off employees are made, whether based on necessity, merit, seniority, or a combination of factors.

Sometimes short-terms layoffs are sufficient to save jobs without endangering the nonprofit’s financial status. An unexpected two-month gap between the completion of a contract and the time of its renewal, for example, could be an effective solution to trimming back expenses during lean times, but if you do this be sure to notify affected staffers and tell them to watch for a renewal notice after several weeks or even longer.

Either way, communication is key. Refer to state laws to verify whether all accrued vacation must be paid out in the event you close for more than a week, in order to avoid paying substantial fines and penalties.

If you’re faced with the reality of doing a large scale layoff and your nonprofit employs more than 50 people, be sure to comply with the WARN Act, a federal law that mandates which notices are required in these situations.

It’s generally only applicable if you have 100 or more employees, but for layoffs of 50 or more employees or 1/3 of your workforce, WARN requires 60-day layoff notices among other steps. Review your own state’s laws to see if there are any state requirements and, if so, how to comply with those.

Tips for Graceful Layoffs

If you’ve decided you need to lay off staff, consult your counsel or HR department for appropriate communications to the affected employees, and to your remaining staff. Though layoff letters are fairly standard for all employers, make sure to refer to the unemployment benefit agency in your state for any required notices the state laws may impose.

In the letter, communicate all relevant information clearly, such as how long insurance benefits will continue, information about COBRA and unemployment insurance, and any support that you can provide, such as severance pay and employment references. And of course, think carefully about the political and emotional impact this can have on your nonprofit, and how best to keep morale up with your remaining team.

Remember, it’s preferable to lay off employees all at once, instead of scattering the notices over a period of time, in order to preserve the peace of mind of remaining staff, who should feel confident that they will keep their jobs. Ideally, break the news on a Friday so people have the weekend to process these painful changes. And minimize the time laid off employees need to continue working to no more than a week after receiving the news: layoffs are difficult news to hear, and dismissed employees may find it tough to muster enough positivity to continue their work effectively.

Knowing which coworkers will or won’t keep their positions may contribute to an awkward work environment, so keep this in mind when sensitively addressing critical subjects such as how specific assigned projects will be managed after the layoffs.

Present layoff information in person so employees have a chance to ask questions; this is far too sensitive a conversation to simply send an email or letter. Although it’s tempting for managers to retreat to their offices and appear absorbed in work, circulating with the staff to interact and answer questions is reassuring and demonstrates confidence.

Be prepared with a sheet addressing possible questions, such as whether or not you can provide a reference, the duration of time they’ll have access to email accounts, and how clients will be notified of changes in contact.

Plan for the Future

Aside from the current shutdown, the frequency of government shutdowns and funding gaps is increasing, and all nonprofits should draw up contingency plans to cushion the impact of these cuts and survive future shutdowns.

Rest assured, as a sector we’ve always been skilled at this. Since so many nonprofits are feeling the effect of the government shutdown, it’s a good idea to reach out to contacts in other nonprofits to see how they’re handling the issue and to identify local resources for employees whose jobs are at risk or lost.

And please post your own ideas and tips below for other Blue Avocado readers!

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