In the news lately we’ve heard about many companies laying off and/or furloughing workers. But what exactly is the difference?
Anyone who lived through the Great Recession or works in construction is familiar with layoffs. A lay off is essentially a termination for reasons other than performance—usually due to a failing economy, failing business, shortage of work, or a crisis. Construction workers are sometimes laid off in the off-season winter months with the hope, but not guarantee, of being rehired when the weather breaks in the spring. Former employees who have been laid off are not entitled to any of the privileges of employment including pay, health care, and other employee benefits. Laid-off workers are permitted to file for unemployment benefits, COBRA to continue healthcare coverage, and, of course, seek other employment. Temporary layoffs are essentially the same, but with a greater expectation for rehire, as is the case with seasonal workers.
Companies who are able to are turning to furloughs. Furloughed workers are still employed and are usually still eligible for the benefits associated with employment such as healthcare. A furlough can come in many forms but the universal rule of the furlough is that employers are not allowed to give non-exempt furloughed employees work. All tasks, however minor, are strictly prohibited, even on a volunteer basis. If you aren’t sure if you or your employee qualifies as an exempt worker, a set of federal standards known as FLSA (Fair Labor Standards Act), provides clear guidance.
What effect will the furlough have on me?
Despite the FLSA standards, employers set the terms of the furlough. There are many courses of action that could fall under your company’s furlough plan. You could be required to use up any accrued paid time off or work only set hours, days, or weeks, but there is always the possibility for the furlough to evolve as the economic situation becomes more clear.
- Hourly employees could see fewer hours per day or fewer days per week, lasting weeks or even months. Because these workers are paid only for hours worked, these terms could impact just some of all of their normally scheduled hours.
- Salaried employees would experience furloughs in week-long blocks since any time worked in a week requires a full week’s pay. They do not qualify for a reduction in hours.
- Flexible work schedule employees’ furlough days are calculated by dividing the number of hours the employee is scheduled biweekly divided by the number of days typically worked in the course of the two week pay period.
- Compressed work schedule employees’ furlough day is equal to the employees’ typical workday (a day under a 4/10 (employee works four 10-hour days) compressed work schedule is 10 hours).
How long can this last?
Unless the job is affected by the changing seasons, the layoff is likely permanent. Furloughs are more temporary. When an employer furloughs its workers, they do so with the intention that the furlough is simply “pausing” or decreasing pay through reduction of hours and forced sick leave. Union representatives can secure a collective bargaining agreement to delineate the terms of the furlough, but for the most part, its length is determined by the economic climate.