As business owners work through the challenges amid COVID-19, you may need to consider what to do with your work force. Many businesses are considering furloughs or layoffs as a means to control costs during this time of uncertainty.
Furlough is mandatory time off at no pay and the employee is still part of the organization. An employee could use PTO during a furlough in order to be paid. Often, an employer will continue to pay for benefits during a furlough but there are no laws that require this. Furloughed employees are still part of the organization and are not terminated.
A lay-off means that the employee is terminated, including both salary and benefits. The door is open for a laid off employee to come back to work but they would have to be rehired.
A furlough may include partial time off but keep in mind that under the Fair Labor Standards Act (FLSA), there are specific rules for exempt employees. Exempt employees typically receive a fixed salary and their pay cannot be docked for working less hours in a week. Therefore, when deciding to furlough an exempt employee, do this in full weeks and consider enforcing a “no work” rule. This will prevent employees from doing work during the furlough and therefore, getting their full pay. Make specific rules about checking emails, responding to emails, logging onto the system, or responding to phone calls, etc.
When a nonexempt employee works during a furlough, you only need to pay them for hours worked, including minimum wage and overtime pay.
The advantage of a furlough is to reduce your costs while retaining key employees. However, this works best if the employee is given a timeframe as to when they will return to work. During the time of the furlough, it’s important to keep in communication with the employee. They should be updated frequently on the business and his/her position.
Check with your employment law attorney before taking any action.
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