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Furloughs for Employees

Because of the current U.S. and global economic crisis, many employers are searching for ways to cut costs without layoffs. Employers are looking for alternatives to layoffs in order to maintain employee morale, while avoiding the cost of higher unemployment insurance premiums, severance packages and/or outplacement, and lawsuits. One option that many public employers and a rising number of private employers have been using is the furlough.

State-by-state comparison of 50 employment laws in all 50 states

What is an employee furlough?
A furlough is when an employer places an employee into temporary non-duty, non-pay status because of budget issues, lack of work, or other non-disciplinary reasons. Furloughs may be voluntary or mandatory and are different from normal layoffs because employees continue to work on a reasonably regular basis. An employer will institute a furlough by scheduling employees to have certain days off without pay. For example, an employer may ask or require an employee to take off every other Monday without pay.

Non-exempt employees
Furloughs are easiest to implement with non-exempt employees because under federal and most state wage and hour laws, non-exempt employees must only be paid for the actual hours they work. Therefore, employers may use furloughs for non-exempt employees by sending them home, and employers don’t have to pay employees for regularly scheduled hours that are not actually worked.

Wage and Hour Compliance Manual

Exempt employees
It is more difficult to implement furloughs for employees that are exempt from wage and hour regulations under the Fair Labor Standards Act (FLSA) and other state laws. Exempt employees are entitled to full weekly salaries for any week they perform work. If an employer does not fully pay an exempt employee for a full workweek, the employee’s exemption status may be jeopardized.

An exempt employee may be furloughed without losing her exempt status if the exempt employee is furloughed for an entire workweek. The employee must perform absolutely no work at all during that week, including even the most minimal tasks (such as checking email or voicemail). If the exempt employee performs any work during that week, the employee will then be entitled to her full weekly salary. The exempt employee’s weekly salary also cannot fall below $455, the current minimum weekly salary requirement for an employee to be considered exempt.

Other Issues
There are other employment law issues to consider when employers implement furloughs. If an employee’s hours are reduced because of a furlough, the employee’s status might change from full-time to part-time, and that status change could affect the employee’s benefits eligibility. There also may be notice or bargaining requirements if a negotiated collective bargaining agreement is in place.

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