Coronavirus: Furloughs, Lay-Offs and Reduction in Force Explained

Posted by Kenneth N. Winkler on

The impact of COVID-19 is forcing employers to make rapid and difficult staffing decisions. Recent headlines highlight massive furloughs, layoffs and workforce reductions throughout the United States. Although each of these actions have separate meanings and purpose, many people lump them together. This can lead to confusion among company decision makers and the employees who are being impacted.  This Blog explains the basic differences between furloughs, layoffs, and reductions-in-force.

Furlough
Employers consider using furloughs to avoid layoffs. A furlough typically reduces employee work hours or requires employees to take a certain amount of unpaid time off. Furloughs allow employees to share the burden of the economic downturn while retaining their jobs (and often their health insurance and other benefits that may remain in place). This may be a better alternative than having some employees lose their jobs.

For example, an employer may furlough its non-exempt employees two days a week and pay them for only the hours actually worked.

Employers wishing to furlough exempt employees must be careful to do so in a way that does not jeopardize their exempt status under the Fair Labor Standards Act (FLSA). This requires paying the employee on a salary basis.   

An employer has flexibility when implementing a furlough; it can furlough the entire workforce or it may exclude some employees who provide essential services.

Layoff
A layoff is a temporary separation from payroll typically due to a lack of work. The employer intends to recall the employee when work again becomes available.  Employees are typically able to collect unemployment benefits while on an unpaid layoff and some states require employers to file for partial unemployment in these situations.

Reduction in Force
A reduction-in-force (RIF) occurs when a position is eliminated without the intention of replacing it. Unlike a layoff, the elimination is a permanent. 

*Reminder:  Employers may consider providing employees who are separated due to a layoff or RIF with severance payments conditioned upon signing a release. Employers who are able to do so must ensure that the releases comply with legal requirements, including but not limited to those of the Older Workers Benefit Protection Act (“OWBPA”).

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