FURLOUGH VS. LAYOFF: DECIDING BETWEEN THE TWO.

AuthorToups, Benton

The unfortunate reality in these very strange times in which we find ourselves is that many businesses have a need to downsize. A common dilemma these businesses face is choosing between furloughs and layoffs. In this piece, I will provide some points of consideration in hopes that they aid employers in making the right choice.

WHAT'S THE DIFFERENCE?

The terms "layoff" and "furlough" are not statutorily defined terms and thus have no legal significance other than their practical effect. Generally speaking, layoff refers to a group termination of a number of employees, with no specific expectation that the employees will be rehired. Furlough, on the other hand, generally refers to a temporary reduction in hours (sometimes to zero) of a group of employees, with the expectation that most will resume their normal schedules once conditions improve.

CONSIDER THE MESSAGE

A business that is downsizing should carefully examine its intent with respect to the affected employees. Is this a permanent measure, or does the organization expect to ramp back up? If the reduction is likely to be permanent, then a layoff seems more fitting. If, however, the intent is to bring the affected employees back, or even if it is undecided, then characterizing the reduction as a furlough has advantages. Namely, while there is nothing preventing furloughed employees from seeking employment elsewhere, employees who consider themselves furloughed are probably less likely to look for replacement employment and thus are more likely to remain available if needed. A furlough may also have less negative effects on employee morale for remaining employees.

Note that a business can style the reduction as a furlough even if it is unsure about whether the affected employees will be returned to work. It is perfectly permissible to let the downsized employees know that the business hopes to bring them back and will contact them with an update at some definite point in the future.

WHAT ABOUT UNEMPLOYMENT?

Whether the reduction is styled a layoff or a furlough, there should be no difference in the affected employees' rights to collect unemployment. On March 17, 2020, Governor Cooper issued Executive Order 118, providing that individuals whose hours are reduced (even if not terminated) during this crisis are entitled to collect unemployment benefits. The Order also suspended the requirement that employees must actively look for another job in order to seek unemployment. Moreover, the...

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