If you’ve recently made the decision to furlough or lay off employees, or are in the process, you’re not alone. Nearly 50% of companies say they are at least somewhat likely to conduct layoffs over the next three months due to the COVID-19 pandemic according to CNBC. What’s more, the Economic Policy Institute estimates almost 20 million jobs will be lost by this summer (see a breakdown of the estimate by state here).
Unfortunately, the COVID-19 pandemic doesn’t have a clear end date – viruses keep their own schedules regardless of what’s helpful for employers and employees. This means you may not be able to make a definite plan about who to recall and when. But now is the time to think about your policies for how you’ll do it when the time comes.
Furlough vs. Layoff
Many people use the terms furlough and layoff interchangeably but there are significant differences between them.
- A furlough, like an unpaid leave of absence, is temporary with the expectation that the employee will be called back to the job. There may be a known recall date or may be open ended, as is the case with many furloughs due to the current pandemic. Employers are advised to stay in touch with employees to keeping them informed about when to return. All furloughed employees retain their right to look for a new job or take on temporary work during the furlough period. They generally may apply for unemployment.
Non-exempt employees who are paid based on hours worked can have a reduction in hours/days as their furlough. Exempt employees must be paid full week’s salary if they do any work in the week at all, so you’ll want to be sure they don’t check email, other seemingly small tasks. Ideally all furloughed employees should observe a “no work” rule. Any salary adjustments to exempt employees must still comply with FLSA minimum salary amounts.
- A layoff can be temporary or permanent, or may begin as temporary and become permanent after a period of time. Often layoffs happen because the employer does not have enough work for all employees, though they anticipate there will be more work at a future time. Laid off employees may apply for unemployment and may look for new job and have no right to recall and no expectation that the job will return.
In both cases benefits such as health insurance coverage may continue if employer’s policy allows for it; although, though if coverage is based on hours worked, employees may no longer be eligible. Furloughed employees may continue to accrue paid time off, but this is based on your paid leave policy.
Providing Advance Notice
Certain employers are required by federal law (and in some cases state law also) to provide advance notice to employees about furloughs or layoffs through the Worker Adjustment and Retraining Notification (WARN) Act. In general, the WARN Act applies in these situations:
- Employer has 100 or more full-time employees
- Layoffs of 500 or more employees
- Layoffs of 50 to 499 employees if those workers comprise at least one-third of its workforce
- Reduction in hours to last over six months
The advance notice ranges from 30 to 90 days depending on the state; although, exceptions may be made for “unusual business circumstances,” such as the COVID-19 pandemic. Always check with your state’s laws and requirements, however.
National Law Review notes, “an employer implementing a layoff because of COVID-19 likely thinks it is announcing a short-term layoff, but if the coronavirus lasts longer than expected, the furlough or layoff could last more than six months. Under the WARN regulations, an employer who has previously announced and carried out an anticipated short-term layoff (six months or less) that is being extended beyond six months due to business circumstances not reasonably foreseeable at the time of the initial layoff is required to give notice when it becomes reasonably foreseeable that the extension is required.”
Developing a Policy
As always, your policies should guide your actions and provide a rationale for them. Examples of what to address in your policy include:
- Your decision-making process for furlough or layoff and types of conditions under which you may choose to make the decision (while noting it’s not an all-inclusive list)
- Selection criteria including if and how seniority plays a role in decisions (many go by last in, first out)
- If PTO will continues to accrue
- What benefits will be continued
- If employees are required to use PTO to cover part of furlough
- If you will first seek voluntary PTO use and then require it
- Types of employees to which the policy applies
- How you will notify employees of a recall
- Any action employees must take in response to a recall notice (such as responding in writing in a certain time period)
- The order in which furloughed employees will be recalled (commonly by seniority)
Bear in mind some of these factors will be in flux during the current situation, so you may wish to include language conveying this is the general policy and not exhaustive for every possible situation.
Here is a sample layoff and recall policy.
Recall, Rehire, and Avoiding Discrimination
While there is an expectation of return to work with a furlough, employers are not legally required to rehire laid off employees or give them preference. The exception to this is if you have an existing agreement with that person or they are subject to a collective bargaining agreement. Note that there is also nothing that prevents a laid off employee from applying for their old job.
Your policy should address the basics about decisions for rehiring after layoffs, but always be careful to avoid any actions that are discriminatory or even those that give the appearance of discrimination. For example, according to the Chronicle, you may “state in your hire-back policy that you will offer positions to former employees on the basis of skill sets, knowledge and the needs of your small business. As long as you don't have a previous agreement with any employees and you use nondiscriminatory methods to decide who to rehire, you can craft your own policy.”
One best practice is to state in your policy that your hiring practices do not discriminate on the basis of race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, age (40 or older), disability and genetic information (including family medical history), as well as protected veteran status. You should also document any and all furlough, layoff, and recall decisions carefully.
It may be tempting to pass over employees with seniority who would command a higher salary or to avoid those who did not perform well in the past; however, you should proceed with caution. If you fill a reinstated position with a new person who is younger, less qualified, or does not fall into a protected class which the previous employee fell into, you could open yourself up to a discrimination claim.
According to SHRM, a “business must be able to show there was a business need for eliminating the position and subsequently adding it back … [and] must be able to show how the position changed and the old person isn’t able to fill it.”
There are several advantages to rehiring employees who were laid off. You already know them and their skills, so they will potentially need less training to get up to speed. And unless they are moving to a different department, they probably know their coworkers and have an established working relationship with them. It’s also good for overall company morale to see coworkers reinstated.
Even though their onboarding may take less time than a new hire’s would, don’t neglect paperwork when rehiring a formerly laid off employee:
There are no existing rules that require completing a new W-4 for rehires, unless your company has such a policy, especially in light of the recently redesigned W-4.
The I-9 requires a closer look:
- If the rehire is within three years of their separation and the documentation used in the original I-9 is still valid (i.e. not expired), update the date in section 3
- If the rehire is within three years of their separation but the documentation is now expired, complete section 3 in full
- If the rehire is more than three years after their separation you must complete a new I-9
Rehiring and recalling employees may feel like it’s a long way off. With the current rapidly-changing public health and economic situation it’s hard to predict your staffing needs. You can count on Horizon now and into the future – please contact us with questions or just to check in.
Disclaimer: This article is provided for informational purposes only and is not intended as legal advice. Please consult an employment attorney or other qualified legal counsel with specific questions.