The COVID-19 pandemic is touching everyone. Not only are people’s safety being impacted, but their work as well. As COVID-19 hits the economy, businesses are considering drastic measures to stay afloat, including furlough or laying off employees.
What is Lay Off?
Lay off is a permanent dismissal of an employee. Employees who are laid off may receive a severance package and may be able to continue their health coverage through COBRA.
What is Furlough?
Furlough is a temporary suspension from work without pay. It can also mean a reduction in work hours. Employees who are furloughed usually get to return to their work after the furlough. The length will depend on the employer. Employers also have the flexibility to require all employees to go on furlough or exclude some employees who provide essential services.
In general, employees on furlough keep their benefits, including health benefits.
Employers will furlough employees as a cost saving measure when they don’t want to lay off valuable employees but lack the resources to continue paying wages. If financial troubles are expected to be temporary, furlough may be preferable.
If employers decide to furlough employees through a reduction in hours, they must consider the effect on “exempt” employees. Employers do not have to pay exempt employees’ overtime, but they generally can’t reduce their weekly pay. If the employer cuts the “exempt” employee’s pay to account for the reduction in hours, it will lose the exemption status for that employee.
Furlough also indicates that an employee cannot do any work whatsoever. Employers may need to temporarily revoke employee access to work accounts and devices. This is to prevent well-meaning employees from doing work that would trigger a payment obligation.
Need assistance with navigating furloughs or employee lay offs during this health crisis? Contact Hackler Flynn & Associates.
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