Continued Corona-Related Questions

One question which has continually been asked during this crisis is how to handle employees when a company is either shutdown or subject to a downturn due to economic reasons. In either situation, a company may have to make the difficult decision to part with employees, either on a permanent or temporary basis. The biggest issue that an employer is faced with during this process is whether to lay off employees or utilize a furlough. There is a significant difference between the two options.

A furlough is a temporary unpaid leave of absence for economic reasons (i.e., there is not enough work for everyone). In a furloughed status, the individual remains an employee of the company and, therefore, the employment relationship is not terminated. The employee remains “on the payroll” but is not paid during this period.

As such, the employee may continue to receive health care benefits (provided the continuation of benefits is permissible under the health care plan). Whether or not the employee is required to pay the “employee share” of the monthly premium is up to the employer, but employers must implement any such option uniformly to all employees.

During a furlough, employees may be permitted to use any available paid leave (sick, vacation, personal, PTO) for compensation purposes. Generally, however, employees are not forced to use this available leave. Because the employee is not paid during a furlough, they cannot perform any duties for the company and should not be asked to do any work.

Furloughed employees are able to apply for and, potentially, collect unemployment compensation (provided they meet the applicable financial requirements). Furloughed employees are generally recalled to work when economic conditions improve (i.e., work becomes available). If only some employees will be furloughed, an employer need Twitters to make sure that you use objective criteria to decide who is chosen and who is not chosen. Similarly, when recalling employees to work from a furlough, you need to do so based upon objective considerations (i.e., not in a discriminatory manner).

The major difference between a furlough and a layoff is that with a layoff the employee is actually terminated. As such, the employee must be paid out for all accrued but unused paid leave (assuming this is the company policy/practice) and must be removed from the company health insurance plan and provided COBRA notice. If and when you want to bring the employee back to work from a layoff, the employee must be rehired.

If you have any questions with this, or any other labor and employment related issue, please contact one of the attorneys at Hoffman & Hlavac.