- What is the difference between a furlough and a layoff or termination?
Furloughs are time off from work without pay, such as a temporary reduction in an employee’s days or hours of work. Furloughs are different from layoffs or terminations. During furloughs, workers remain employed and sometimes work a reduced schedule. Layoffs or terminations involve a separation from employment.
- Can both exempt and nonexempt employees be furloughed?
Yes, although furloughs are simpler for nonexempt employees who are paid by the hour. In general, if an employer reduces the hours of a nonexempt employee, the employee must be paid only for the hours actually worked.
Exempt employees who are paid a salary are entitled to receive a set salary of at least $684 per week (unless a higher minimum salary is required by applicable state law), regardless of the quality or quantity of work performed. These employees are also entitled to their full salary during any week in which they perform any work. Employers may, however, achieve cost savings by formally and prospectively reducing an exempt employee’s salary, provided that the reduced salary still meets the federal or applicable state minimum salary level, and that the new salary is paid regardless of the quality or quantity of the work performed. If employers prospectively reduce an exempt employee’s salary, the law requires that the employee must be paid a full salary until the following week (in Massachusetts) or the following pay period (in New Hampshire).
Employers who are contemplating a furlough may wish to review the Department of Labor’s Fact Sheet #70 which provides additional helpful information about wage issues that arise during furloughs.
- How long can employees stay on benefits without going on COBRA?
This depends on the terms of the benefits plan and how much of a reduction in hours the furlough causes. For health insurance plans covered by COBRA, a reduction in hours that is not accompanied by an immediate termination of employment (in other words, a furlough) is a qualifying event under COBRA provided that the reduction in hours also results in the employee losing eligibility for coverage under the terms of the plan. This is true regardless of whether the covered employee continues to work following the reduction in hours of employment.
Employers should keep in mind that a reduction in an employee’s hours for a reason covered by the Family Medical Leave Act does not trigger COBRA because health benefits must be maintained during a leave of absence under the FMLA.
- Are employees eligible for unemployment benefits while on furlough?
This will depend on the extent of the reduction in an employee’s hours due to the furlough.
In Massachusetts, if a reduction in hours results in an employee earning less than the weekly unemployment benefit that the employee could otherwise receive if totally unemployed, the employee may be eligible for partial unemployment benefits. Employers may apply for approval of a workshare program under which employees’ hours are reduced in order to avoid layoffs. If such a program is approved, employees whose hours are reduced under the plan would be entitled to unemployment benefits.
New Hampshire has similar rules regarding unemployment benefits during partial unemployment. Employees are eligible for benefits when a reduction in their employment results in earnings that are less than their weekly unemployment benefit amount. New Hampshire employers may also submit workshare program plans for approval. Employees covered by such a plan, and whose hours are reduced, would be eligible for unemployment benefits.
In Massachusetts, under the emergency legislation recently filed by Governor Baker, the one-week waiting period for collecting unemployment benefits is waived for certain individuals. The legislation provides such benefits for persons seeking unemployment benefits who are “separated from work as a result of any circumstance relating to or resulting from the outbreak of the 2019 novel Coronavirus or “COVID-19” or the effects of the Governor’s March 10, 2020 declaration of a state of emergency.” The emergency regulations filed as part of the legislation also create a special standby status for employees who are temporarily unemployed due to lack of work because of COVID-19. Such individuals will be considered unemployed due to lack of work regardless of whether their workplace is shut down or they need to stay home for any reason related to COVID-19. In order to fulfill the requirement that an individual be able, available, and actively seeking work, the individual need only take reasonable measures to maintain contact with the employer, and to be available for the hours of work offered by the employer.
Under the emergency legislation in New Hampshire, the one-week waiting period for collecting unemployment benefits is also waived. Unemployment benefits are available to employees and self-employed individuals who are not working due to a diagnosis of COVID-19, are under quarantine, are caring for someone with a diagnosis or who is under quarantine, or are caring for a family member who is unable to care for themselves due to a COVID-19 related school, child care, or other program closure.
- Do employers have to pay out accrued PTO or vacation time when an employee is furloughed (as contrasted with a layoff or termination)?
Since a furloughed employee is still employed, accrued unused PTO or vacation time would not need to be paid out. Such PTO or vacation time may, however, be used to cover time out of work due to the furlough. In that case, PTO or vacation time would still be paid out by the employer, but the expense would be spread over time, rather than being paid all at once. Furloughed employees who are still working a reduced schedule should continue to accrue PTO or vacation time and other benefits during any period of time in which the furlough is in effect in accordance with the employer’s usual benefits accrual policies.
- Can employers require employees to use vacation time or PTO during furloughs?
Yes. Ordinarily, employers can require employees to use PTO during business shutdowns. However, if employers plan to do so, they should have a written policy in place that provides for such compulsory use. Under the unique circumstances and difficulties presented by COVID-19, a better practice would be for employers to make the use of paid leave optional rather than compulsory.