Managing Employees Through Unemployment, Layoff and Furloughs

By Erica Brune, President, Lever1

Employers are being faced with tough decisions every day as they try to navigate the COVID-19 pandemic and the changes it has brought to their businesses. What is the difference between a layoff and a furlough? How do I decide who gets terminated versus furloughed and how can I guarantee my employees will receive unemployment benefits while they are off work?

Many business owners are asking these questions for the first time and there are decisions that must be made quickly.

Every day there is new information being released and it can be overwhelming, especially when many business owners are dealing with a reduction in force for the first time.

Unemployment

Throughout the pandemic, we have seen a considerable increase in unemployment claims as many businesses are forced to shut down or slow their functions. The U.S. has now surpassed 20% unemployment due to the coronavirus outbreak and more than 26.5 million jobs have been lost. There are various ways for employers to help manage the changing landscape of their industry. Depending on the business’s operations and circumstances, the introduction of furloughs, layoffs, and reduction in force can be necessary. Most business owners are deeply concerned about the welfare of their employees and want to ensure that their workers will gain the benefits from unemployment while they are off work. Important to remember unemployment is a tricky calculation and each employee may earn a different benefit. In addition, each state has a different threshold of benefits paid and what is required to qualify. Typically, the employee must meet minimums in both wages earned and employment length to be eligible.

Furloughs

A furlough is considered an alternative to a layoff, requiring employees to work fewer hours or take a certain amount of unpaid time off while remaining an “active” employee. Employers have the option to furlough their non-exempt employees one day a week and pay them for only 32 hours instead of their normal 40 or employers can require employees to take a week or two of unpaid leave during this time.

When furloughing exempt employees, employers must be cautious, so they continue to pay them on a salary basis and do not jeopardize their exempt status under the Fair Labor Standards Act (FLSA).

A furlough that encompasses a full workweek is one way to accomplish this, since the FLSA states exempt employees do not have to be paid for any week in which they do not perform any work.

An employer may require all employees to go on furlough, or it may exclude some employees who provide essential services. Generally, the idea is to have many employees share some hardship as opposed to a few employees losing their jobs completely.

Furloughs help companies weather a financial storm in several ways, such as reducing labor costs without adding new costs such as severance packages and outplacement services. When business improves the thought is employers do not have to pay for recruiting, selecting, socializing and training new employees because the furloughed workers can pick up where they left off.

Layoffs

Another option employers have during this time are layoffs, which are temporary separations from payroll because there is not enough work for the employee to perform. With this option, an employer believes the condition will change and intends to recall the person when work becomes available again. During a layoff, an employee is typically able to collect unemployment benefits and many times, an employer will allow employees to maintain benefit coverage for a defined period as an incentive to remain available for recall.

Reduction in Force

A Reduction in Force (RIF) is when a position is eliminated without the intention of replacing it and involves a permanent cut in headcount. A layoff may turn into a RIF or the employer may choose to immediately reduce their workforce. A RIF can be accomplished by terminating employees or by means of attrition. When an employee is terminated pursuant to a reduction in force, it is sometimes referred to as being “riffed.” However, some employers use layoff as a synonym for what is a permanent separation. This may be confusing to the affected employee because it implies that recall is a possibility which may prevent the employee from actively seeking a new job.

Businesses are seeing significant revenue losses due to the coronavirus pandemic and are weighing some stark options: furloughs, reductions in hours and pay cuts, layoffs or reduction in force (RIF).

If the company determines it must reduce the workforce because of adverse economic or other conditions, then layoffs and recall from layoffs will generally be conducted in a consistent manner.

When deciding which employees will be laid-off, furloughed or terminated, it is important to follow a set of selection criteria to avoid any wrongful termination lawsuits, should they arise.

The selection criteria should be based off the following:

• Promotion potential and transferability of skills to other positions within the unit.
• Demonstrated current and past performance.
• The needs of the company and specific projects.
• Length of service with the company.

An employee’s length of service is measured from the original date of employment with the company if there has not been a break in service greater than 30 days. Employees with breaks in service greater than 30 days, but less than one year, are credited only for their time actually worked; that is, the break in service time does not get credited in an employee’s length of service unless required by law. Employees with a break in service greater than one year will receive credit for service from their most recent date of hire with the company.

Employees selected for layoff will be given as much notice as is required by law or as much as is reasonable under the circumstances. If the layoff is expected to exceed 30 days, unused vacation days accrued will be paid at the time of layoff. Employees who are laid off will not continue to accrue vacation or sick leave during the layoff.

Recalling employees

Employees who are laid off will be maintained on a recall list for six months or until management determines the layoff is permanent, whichever occurs first. Removal from the recall list terminates all job rights the employee may have. While on the recall list, employees should inform the human resource (HR) department if they become unavailable for recall. Employees who do not keep a current home address and phone number on record with the HR department will lose their recall rights.

Employees will be recalled according to the needs of the Company, the employee’s classification and ability to perform the job. Notice of recall will be sent by registered mail, return receipt requested, to the employee’s home address on record. Unless an employee responds to the recall notice within seven days following receipt of the notice or its attempted delivery, the employee’s name will be removed from the recall list and the employee will no longer have any job rights with the company.

Credit for seniority will continue to accumulate during any layoff of 30 days or less. Employees laid off for more than 30 days and subsequently recalled within six months from the date of layoff will be credited with the service accumulated at the time of layoff.

Families First Coronavirus Response Act

Families First Coronavirus Response Act (FFCRA) requires certain employers to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19. These provisions apply from April 1, 2020, through Dec. 31, 2020.

Generally, employers covered under the Act must provide employees: Up to two weeks (80 hours, or a part-time employee’s two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or federal minimum wage, paid at:

• 100% for qualifying reasons #1-3 below, up to $511 daily and $5,110 total;
• 2/3 for qualifying reasons #4 and #6 below, up to $200 daily and $2,000 total;
• Up to 12 weeks of paid sick leave and expanded family and medical leave paid at 2/3 for qualifying reason #5 below for up to $200 daily and $12,000 total; and
• A part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.

An employee is entitled to take leave related to COVID-19 if the employee is unable to work, including unable to telework, because the employee:

1. Is subject to a federal, state or local quarantine or isolation order related to COVID-19
2. Has been advised by a health care provider to self-quarantine related to COVID-19
3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis
4. Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2)
5. Is caring for his or her child whose school or place of care is closed due to COVID-19 related reasons
6. Is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services

Expanded FMLA leave

The only way an employee qualifies for the expanded FMLA leave is to be employed for at least 30 days prior to request, be unable to work or telework, and have a child whose school or daycare provider is closed due to the health emergency. Employees are able to take intermittent FMLA, but we recommend implementing a schedule between the employee and employer.

In many cases, companies have implemented telework procedures for employees who are able to do so, however, the employee cannot “choose” to take paid leave in substitution. If the employee is unable to perform those tasks or work the required hours because of one of the qualifying reasons for paid sick leave, then the employee is entitled to take paid sick leave.

Business owners are facing challenges they never dreamed they would. Taking time to fully understand your options, convey clear and frequent communication to your staff will ultimately lead to the best opportunity for long term success.

ERICA BRUNE is President of Lever1, a Kansas City-based professional employer organization (PEO) providing human resources, payroll and employee benefit solutions. Within five years of launching Lever1, Erica helped drive the company to become Missouri’s Fastest Growing Company of 2017—ranked No. 44 in the nation by Inc. Magazine and Women Presidents’ Organization recently named Erica No. 4 in The 50 Fastest-Growing Women-Owned/Led Companies 2018. With Erica’s guidance, Lever1 has secured an industry-wide reputation of excellence, operational reliability and thought leadership.

Erica Brune holds a dual role as CAO of an Inc. 500/5000 Fastest Growing Company, Blue Chair Holdings – which includes subsidiary Gragg Advertising. Honored among Kansas City Business Journal’s 2016 Women Who Mean Business, Erica offers 19 years of human resources and strategic fiscal reporting that has led to 45% financial growth year over year for her companies.

Within the first three years of operation Lever1 expanded business into over 40 states and provides services to nearly 3,000 lives. Under Erica’s leadership, the Lever1 staff allows clients the freedom to focus on the core goals of their business. These achievements have earned Lever1 recognition among 2017’s Top 25 KC Companies by Thinking Bigger Business and recognition as 2017 and 2018 Ernst & Young Entrepreneur of the Year Finalist.

Her team’s customer-first mindset drives the PEO to achieve greatness for its clients and help them succeed. From providing countless workshops on HR topics for entrepreneurs to nonprofit and charity work, Erica is engrained in the community and giving back continues to be an incredibly important aspect of Lever1. Erica’s expertise has been shared in renowned publications including Kansas City Business Journal, National Apartment Association and Thinking Bigger Business.

Erica is also seen regularly speaking across the nation as an expert in human capital management and business growth strategies with topics such as pay equity, HR for your small business and recruiting top talent to grow your business. Erica has been featured at national conferences such as NAPEO, NAWBO and Non-Profit Connect.