COVID-19: Furlough Policies

As quarantine, isolation, and stay-at-home orders remain in place, employers and employees are facing business closures and workload reductions which have lasted for several weeks and could continue for months. As a result, employers need to consider the possibility of layoffs or furloughs for their workforce.

While a layoff is, for all intents and purposes, a termination, a furlough is a mandatory, temporary, unpaid leave from work.  Furloughs can be for one day a week (for example, many California school districts instituted “furlough days” several years ago, sporadic days without school to try and reduce payroll due to budgetary concerns) or for a longer duration.  At the end of a furlough, employees are notified they can return to work.  The idea behind a furlough is that a reduction in work will be spread across multiple employees instead of just one, hopefully reducing the number of employees facing a layoff.

For employers who are currently experiencing a reduction in business yet expect to reopen or hope for an increase in work in the coming months, furloughing employees should be considered as an option.

Creating and distributing a furlough policy to employees can provide guidance and expectations for the furlough and employees’ ongoing employment with the company.  In a time of uncertainty and constant changes, it can also provide reassurance to your workforce.

Things to consider when drafting a furlough policy:

  • Start with an introductory paragraph explaining the company is experiencing a reduction in business due to the current economic situation and public health emergency/COVID-19, and, as a result, the company must impose a furlough on some employees
  • Employees are not fired, terminated, or laid off.  Work hours are being reduced for business reasons
  • Employees are expected to return to their normal work schedule at the end of the furlough period
  • Hourly, non-exempt employees will be paid for all hours/days worked and will not be paid for hours/days for which they are required to take furlough leave without pay
  • Exempt employees will be subject to partial-week or full-week furloughs
  • Employees are free to seek employment with other employers during this time, subject to all company agreements and policies.  If an employee secures alternate employment, they need to inform the company/their supervisor/designated contact person immediately
  • Company benefits will continue during the furlough period
  • Employees may file for unemployment due to the reduction in schedule caused by the furlough (direct employees to your state’s unemployment agency – in California, it is
  • Employees must continue to follow all usual work policies and procedures (and the policies and procedures in the Employee Handbook, if you have one – consider making this and the policies and procedures accessible online or sending electronic copies to all employees)
  • Employees must notify the company/their supervisor/designated contact person of any changes in contact information so the company can continue to reach employees

In California, the Department of Labor Standards and Enforcement (DLSE) has determined that a properly executed week-long furlough will not result in the employee losing an exemption or being paid improperly as a salaried, exempt individual.  However, exempt employees must be paid for the entire workweek if they perform any work within that workweek.  As a result, the furlough must be for the entire defined workweek(s) and advance notice must be given.

Exempt employees can also be subject to partial-week furloughs, for example, 80% work for 80%, but this is viewed as a salary reduction, not necessarily a true furlough.  Employees should also be given advance notice of this type of arrangement.  In both scenarios, it is important to ensure the employee’s salary does not dip below the minimum exempt salary threshold.

Additionally, DLSE guidance states that furloughs longer than 10 days may constitute terminations, and therefore employees would be entitled to final pay, vacation time, and all other notices, paperwork, and information when a termination occurs.  While DLSE guidance is not binding on California courts, it is still something to consider when examining the scope and duration of a potential furlough.

At the end of the policy, include an acknowledgment of receipt for the employee to sign and return to you.  This document should be added to their personnel file. Make sure to include contact information for a company representative and/or direct employees to their supervisors if they have any questions – this is uncharted territory for many employers and employees alike, and it is important to encourage open communication and asking of questions in order to effectively furlough employees and ensure you are limiting exposure to off-the-clock work during a furlough leave.

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