Furloughs are appealing solutions to cash shortages, but they are not simple to implement, says Doug Christensen, a partner in Dorsey & Whitney’s Labor and Employment law practice group in Minneapolis.
In a recent article in USA TODAY, Christensen explained that there are a number of complex legal issues that companies must navigate, such as:
- Firms need to check for any pre-existing employment agreements that will allow workers to claim that they were “legally promised” certain pay per week, month, or year.
- Firms with exempt employees must be careful how they structure the leaves to make sure that the furlough is not done in a way that converts those exempt workers into nonexempt employees who could try to claim overtime pay.
- If an exempt employee performs any work at all during a week-long furlough—such as answering an e-mail that comes through a work BlackBerry®—he or she is owed the entire week’s salary.
Pros and Cons of Furloughs for Longer Periods
In a recent posting on HR.BLR.com® Attorney Bernard E. Jacques discussed the pros and cons of using furloughs instead of layoffs.
Although furloughs reduce business risks that are typically associated with layoffs, he says furloughs pose some legal risks that employers should consider.
“There’s no magic legal definition that would cover the difference between a layoff and a furlough,” says Jacques, a partner and labor and employment attorney at Pepe & Hazard, LLP.
However, as commonly defined, a “layoff” gives “no sense or indication that the person will be recalled,” and a “furlough” generally means that an employee will be out for a period of time or that the employer at least intends to recall the person, Jacques explains.
HR budget cuts? Let us help. HR.BLR.com® is your one-stop solution for all your HR compliance and training needs. Take a no-cost, no-obligation trial and get a complimentary copy of our special report Top 100 FLSA Overtime Q & A’s. It’s yours, no matter what you decide.
Risky Business Decisions
Furloughs are less risky than layoffs from a business perspective, he says. Furloughed employees might be willing to wait to be recalled, thus reducing recruiting and training costs later. However, laid-off employees—and even layoff “survivors”—often look elsewhere for employment.
Furloughs can create some potential problems that employers need to consider. If an employer promises to recall workers, but then cannot afford to do so, “at a minimum, it’s going to lead to a lot of frustration and anger,” Jacques says.
In some cases, such a promise can also create legal problems. For example, if an employer implements a furlough and tells an employee that he is going to be recalled on a particular date, the employee might not look for another job or might turn down a job offer from another company. If the employee is not recalled, that can lead to a “detrimental reliance” or “implied contract” claim in some states, Jacques explains.
Give Yourself an Exit Strategy
“You ought to make it very clear that it is your intent to bring people back, but that is contingent upon certain things” happening (e.g., improvement in the company’s economic condition, or a new contract award), Jacques says. You are not guaranteeing that you will be able to recall them.
Consider Compensation Issues
“If you have exempt employees, you’re going to have to manage any furlough or layoff very carefully. You cannot have a furlough every Friday and then not pay an exempt employee for those Fridays,” Jacques says, noting that employers cannot reduce compensation for exempt employees to address temporary economic reasons. Instead, exempt employees would have to be placed on furlough for a block of time, generally for a week or more.
And here’s our tip for dealing with layoffs, terminations, and furloughs—you go to HR.BLR.com. It’s a trusted source that answers all those pesky HR questions. EEO-1 reports? COBRA changes? FMLA intermittent leave? ADA accommodation? In HR, if it’s not one thing it’s another. You need a go-to resource, and our editors recommend the “everything HR in one website,” HR.BLR.com. As an example of what you will find there, here are some tips on hiring, taken from a supervisor handout on the website:
- Evaluate applications and résumés against a written job description that outlines essential job functions and defines the skills, knowledge, aptitudes, and abilities required to perform the job effectively.
- Check references and compare the information you obtain with applications and résumés. Surveys report that 30 percent to 50 percent of job applicants either lie or exaggerate on applications and résumés.
- Don’t let personal prejudices interfere with the screening process. Evaluate each candidate based on objective job qualifications.
- Know—and follow strictly—requirements of company hiring policies and the fair employment laws.
We should point out that this is just one of hundreds of such handouts and other supervisor training aids on the site.
Find out what everyone is talking about. Take a no-cost look at HR.BLR.com and get a complimentary gift.
You can examine the entire HR.BLR.com program free of any cost or commitment. It’s quite remarkable—30 years of accumulated HR knowledge, tools, and skills gathered in one place, and accessible at the click of a mouse.
What’s more, we’ll supply a free download copy of our special report Top 100 FLSA Overtime Q & A’s just for looking at HR.BLR.com. If you’d like to try it at absolutely no cost or obligation to continue (and get the special report, no matter what you decide), go here.
Other Recent Articles on HR Policies and Procedures
Mandatory Furloughs—Attractive, But Legally Tricky
RIFs: Beware the Hidden Costs
RIF Rules—The 6 WARN Exceptions
Name, Rank, Serial Number … and How Much Else?