What is a Layoff?
When a business does not have sufficient work to keep its employees busy, it may decide to conduct a layoff. When a layoff occurs, the employment relationship between the company and the employee is terminated. Generally, when an individual’s employment ends, neither the laid off employee nor the company expects the laid off employee to later return to his/her employment with the company.
What is a Furlough?
A furlough is similar to a layoff in that it is implemented when a business does not have sufficient work for its employees. However, unlike a layoff, when an employee is furloughed, his/her employment with the company is not terminated. Rather, when furloughed, the company places the employee on a temporary leave of absence with the expectation that it will recall the employee at a date in the foreseeable future to resume his/her duties.
To the extent a furlough is expected to last longer than six months, employers with 100 or more employees should consult with counsel about the possibility of the furlough triggering the requirements of the Federal Worker Adjustment and Retraining Notification Act (WARN Act).
It is also important to recognize that the term furlough is sometimes used for two different types of situations. The first is a full-time, temporary leave of absence as discussed above. The second is when employees are relieved of their duties for, for example, a day a week or a week a month. This Client Alert focuses on the first type of situation.
Are Employees Entitled to Receive their Wages/Salaries While on a Furlough?
Under both Massachusetts and federal law, non-exempt employees are entitled to be compensated for all hours worked, and exempt employees are entitled to their full salary for any week in which they perform any work (subject to certain exceptions). If an employee is not performing any work during a furlough covering a full pay period, the employee is not entitled to be paid his/her wages/salary. An employer can, of course, decide to voluntarily compensate its employees during a furlough but it is not required.
If Employees are Furloughed, is an Employer Required to Continue to Provide the Employee with Access to the Company’s Email/Computer System?
No, there is no requirement that the employer maintain furloughed employees’ access to the company’s computer/email system. Employers may, however, decide to maintain furloughed employees’ access to computer/email systems for several reasons, including to maintain lines of communication with employees.
To the extent employers do maintain access for furloughed employees, employers should be aware that if employees use their email and/or computer access to perform work while on furlough (for example, reviewing and responding to emails), non-exempt employees would be entitled to compensation for all time worked, and
exempt employees would be entitled to their full weekly salary.
For that reason, at the time employees are furloughed, employers should instruct employees not to perform any work while on furlough. If an employee disregards an employer’s directive not to perform any work, the employer must nonetheless compensate the employee for the work performed. An employer should address the employee’s insubordination through its standard disciplinary process.
Are Furloughed Employees Eligible for Unemployment Benefits?
Yes. The Massachusetts Department of Unemployment Assistance (DUA) has issued guidance stating that “workers who are temporarily unemployed due to a lack of work because of COVID-19 will be eligible for unemployment benefits.” The DUA considers employees to be unemployed due to a lack of work regardless of whether an employee is laid off or furloughed. Thus, when an employer lays off or furloughs employees, it should encourage employees to apply for unemployment assistance and provide them with the required
on how to file for benefits.
What happens to an Employee’s Accrued, Unused Vacation Time if the Employee is Furloughed?
As many employers are aware, under Massachusetts law, vacation is considered a “wage.” Thus, because an employee whose employment is terminated is entitled to receive all wages earned but not yet paid, the
employee must, too, be paid for all accrued, unused vacation.
The rules are slightly different if an employee is furloughed. Specifically, the Attorney General’s Office has recently
that if an employee is furloughed,
and the employee’s employment benefits, such as health insurance benefits, disability insurance, and retirement contributions are continued
(discussed in another FAQ below), the employer is not required to payout accrued, unused vacation. However, when an employee’s benefits cease, the furlough is viewed by the Massachusetts Attorney General as a layoff and the employee is entitled to be paid his/her accrued, unused vacation unless the employee voluntarily agrees to keep it in
his/her “bank” for future use when the employee returns from furlough. In the event an employee voluntarily agrees not to be paid out for accrued, unused vacation when furloughed, employers should memorialize this agreement in writing.
If, during the furlough, the employee either resigns his/her employment or has his/her employment terminated by the company, the employee is entitled to be paid all accrued, unused vacation. In addition, if the employee were to revoke his agreement to bank any accrued, unused vacation, the employer should immediately payout the accrued, unused vacation.
What Happens to an Employee’s Health Benefits When Laid Off or Furloughed?
When an employee is laid off, he/she is no longer eligible to participate in his/her employer sponsored health plan. The layoff constitutes a qualifying event under COBRA (employers with twenty or more employees) or Mini-COBRA (employers fewer than twenty employees) and the employee can elect to continue his/her health insurance coverage under the employer’s group health plan by paying the full amount of the premiums. (As an aside, employers should notify their health insurance brokers in the event of layoff so the broker can issue COBRA or Mini-COBRA notices to the affected employees.)
Unlike a layoff, when an employee is furloughed, the employee may be able to continue his/her coverage under the employer sponsored health plan. To the extent that the employer wants to continue furloughed employees on its health plan and pay the employer portion of the premium, the employer should check with its insurance broker to determine whether continuing coverage in that respect is permitted by the plan documents. If the plan documents do not permit an employee’s continued coverage while furloughed, COBRA or Mini-COBRA notices should be sent to affected employees.
This is not an exhaustive list of possible considerations and each particular circumstance may differ depending on the facts involved. For these reasons, it is recommended that employers consult with counsel if they are unsure about a particular course of action. Please contact Mirick O’Connell’s Labor, Employment, and Employee Benefits Group if you have any questions about this topic or any other employment issues your company may be facing due to the COVID-19 pandemic.