Compliance Matters: Layoffs and Furloughs

May 13, 2020

No matter the cause of the event, layoffs and furloughs are stressful for any organization to navigate. In the midst of COVID-19, countless employers are facing unpredictable health crises, revenue challenges, operational barriers and other rapidly evolving circumstances that threaten the viability of their business. Tough decisions are being made to reduce work hours and close worksites. And as you can guess, the brunt of responsibility for ensuring compliance with furlough and layoff laws tends to fall on HR.

But you don’t have to navigate such complex matters alone. We’ve put together some of the most fundamental “need-to-knows” to help start you on the path to layoff and furlough compliance.

Furlough vs Layoff

One of the first steps toward achieving furlough and layoff compliance is to create distinction between the two, as they are commonly perceived (and confused) as interchangeable terms. More importantly, organizations and companies must understand the full implications of each as cost-saving employment measures, then figure out which option is an ideal fit for them.

As defined by SHRM, a furlough is a mandatory temporary leave of absence where employees are expected to return to work or be restored from a reduced work schedule. This agreement could stretch across a range of timeframes – days, weeks or months and at varying frequency. The dividing line here is that reduction in hours or unpaid time off is generally temporary.

Helpful Tip: Paying out PTO, if applicable, may not be required if you intend to recall employees. It’s also important to establish recall dates and conditions for your employee’s return.

On the other hand, layoffs are a complete separation from employment due to a lack of work available. They are technically different from termination by definition – as employees aren’t being removed due to any professional error or violation. But layoffs are not very different from a functional perspective; both processes involve removing employees from “your books”. As a business that genuinely cares about its people, you may hope to recall workers once financial circumstances improve. But layoffs provide no guarantees that termination won’t be permanent.

Helpful Tip: As a note, various carrier and/or marketplace options may exist that enable furloughed and even laid-off employees to continue receiving benefit coverage once unemployed. From COBRA, ACA Look-Back Method, unemployment insurance and more, employers will want to be well-versed on benefit plans and obligations, as some individual states require businesses to oversee benefit continuations, or even file on their former employees’ behalf.

Understanding WARN

Furloughs and layoffs can help alleviate the financial burden for companies struggling to generate cash, but you will find that legal requirements vary for each option. If your company is facing layoff or furlough pressures during COVID-19, one of the greatest precautions you can take is to understand the federal Worker Adjustment and Retraining Notification Act (WARN). Under the law, employers — with 100 or more workers — must provide at least 60 days of advance notice of layoffs and plant closings. To get a better understanding of which layoff or furlough actions could trigger a WARN policy, check out the following: 

This summary is only a first step toward understanding the full breadth of layoff, furlough and recall compliance matters. But now, more than ever, it is paramount that companies remain knowledgeable if they will be impacted by workforce reduction decisions. Contact SourcePointe for a deeper dive into WARN, furloughs, layoffs and other first-hand guidance on navigating compliance issues during COVID-19.

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