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Furlough vs. Layoff vs. Reduction in Force vs. Termination

 

During this time of economic uncertainty due to the Coronavirus (COVID-19) pandemic, companies throughout the nation are taking action to reduce costs, including payroll. As a result, employees may be furloughed, laid off, riffed, or, ultimately, terminated. These terms are often used interchangeably, but what do they actually mean?

Furlough

Typically, a “furlough” occurs when an employer requires employees to work fewer hours during the workweek or take a certain amount of unpaid time off. Furloughed employees are not permanently separated from the company but remain employed and are restored after a certain period of time.

Employers who furlough employees should comply with the provisions of the Fair Labor Standards Act (‘FLSA”) regarding nonexempt and exempt employees.

Layoff

When there is not enough work for employees to perform, an employer may consider initiating a layoff, which is a temporary separation from payroll. Like a furlough, when an employer decides to layoff employees, the idea is that the laid off employees will return to work (typically through a rehire) when work is available or the employer’s financial condition improves. However, unlike a furlough in which employees may still be paid, when a lay off occurs, the employees are no longer paid their wages.

Employers should comply with the notice provisions of the Worker Adjustment and Retraining Notification Act (“WARN Act”), if applicable.

Reduction in Force (“RIF”)

A RIF occurs when a position, department, or subdivision of a company is eliminated without the intention of replacing it. A RIF is typically permanent in nature and geared toward permanently reducing the headcount in a company or a subset of the company. Although the terms “layoff” and “RIF” are commonly used interchangeably, the main difference between the terms relates to the permanency of the separation.

As with layoffs, however, employers may be subject to the WARN Act notice requirements.

Termination

Termination occurs when an employee permanently separates from the employer. Specifically, the employment relationship is terminated voluntarily or involuntarily and for cause or without cause.

Unemployment Benefits

Employees who are furloughed, laid off, riffed, or terminated may be eligible for unemployment insurance benefits. Employees separated from their positions should contact their local unemployment offices to determine their eligibility for benefits.

What Does This Mean for Employers?

Given the current global pandemic, employers should carefully analyze the type of separation most beneficial to the business needs while complying with other statutes such as FLSA and the WARN Act.

 

For more information on separation of employment and which option may be the best for your company, please contact the attorneys at York Bowman Law, LLC.

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