The Difference Between Lay-Offs and Furloughs

In Business Tips, Department of Labor (DOL), Employment Contract, Employment Law by Larry DonahueLeave a Comment

Lay-Off vs Furlough

Lay-Off and furlough are two terms that are often used interchangeably but have two very different meanings. While lay-off is a form of termination, furlough is a type of unpaid leave that allows the employee to maintain their employment status and, in some cases, to maintain their benefit eligibility (check with your benefit carriers to see if they are waiving limitation rules at this time). Under the new emergency legislation resulting from the global pandemic emergency, both statuses would allow employees to collect unemployment and would not jeopardize their eligibility for other provisions afforded through the proposed coronavirus stimulus package (CARE Act).

Reduction of Hours

Another option is to reduce employee work schedules, adjusting to match the amount of business being generated.

Non-Exempt Employees

Non-exempt employees are most often those employees paid on an hourly basis and subject to the Fair Labor Standards Act (FLSA) overtime requirements. Since these employees are paid for their time spent working, there are fewer legal obligations to consider when making these changes. Do not, however, ignore overtime requirements – employees are still entitled to overtime pay if they work enough hours to meet the requirement. FLSA states that any hours worked over 40 in the work week are subject to the overtime rate which is one and one half of the employee’s regular rate of pay. Be sure to check your state overtime requirements, they may differ from those set in FLSA.

You will also want to consider if the Worker Adjustment and Retraining Notification Act (WARN Act) is applicable to your organization before making any changes. The WARN Act has special provisions that apply in the event of a natural disaster that could apply in this case. Find out more here.

Exempt Employees

Exempt employees are most often employees who are paid on a salary basis and are exempt from the overtime provisions set under FLSA. Salary employees are not paid for their time but rather for the work they do and must be paid their full salary amount (at least $684/week to qualify for the FLSA exemption) regardless of how much time was spent working in the work week. For that reason, if your goal is cost savings, the directive to salary employees cannot be to work fewer hours. You will have to reduce their annual compensation instead.

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