I recently hosted a virtual employer round table to allow attendees to share ideas and best practices as we all find ways to respond to the Coronavirus crisis. I was fortunate to have Mary Jo Kennedy and Scott Foster from Bulkley, Richardson and Gelinas, LLP join us to offer their insights.
One of the questions was, “What’s the difference between a layoff and a furlough?” Mary Jo offered some excellent information. I thought it was important enough to share with others, so I asked if she would be a guest author for our blog this week. She agreed, and the following post was written by her.
As businesses plan for the reopening of the economy, many employers may find that their needs have changed. Those employers will need to consider for the first (or second) time during this pandemic reducing the number of their employees on a permanent or temporary basis. It is helpful to review the options an employer has in making these employment decisions.
Layoff
When an employee is laid off, an employer is terminating the employment relationship. On the day of layoff, an employer must pay the laid off employee all wages due, including accrued but unused vacation, and the employer will terminate all of the laid off employee’s benefits (e.g. health, disability, retirement). In a union setting, employers will need to review the applicable collective bargaining agreements to see if there is a process to be followed for layoffs. If an employer has a layoff policy, the employer will need to follow the process set forth in that policy. Employers with more than 100 employees must also determine if they need to comply with the requirements of the WARN Act, which include a 60-day advance notice of a “mass layoff” as defined by the Warn Act. While there are some exceptions to the 60-day requirement, the Warn Act still requires employers to provide notice to employees of a “mass layoff” as soon as practical.
Furlough
Some employers may find that the need to reduce their workforce is only temporary and that those employees will be needed in the coming weeks. A furlough is when an employer has instructed its employees not to work for a specified time period, typically weeks not months. Unlike a layoff, recall of furloughed employees only requires that the employee be put back on payroll. Similar to laid off employees, when furloughed, employees have a right to be paid all wages due, including accrued but unused vacation. According to the Massachusetts Attorney General’s Frequently Asked Questions About COVID-19: Employee Rights and Employer Obligations (“AG’s FAQs”), if an employee voluntarily agrees to save accrued vacation for later use, the Attorney General’s Office will not take enforcement action for untimely payment of vacation pay. However, this does not preclude an employee bringing their own action against the employer for failure to pay accrued vacation. The AG’s FAQs states that if the employer and employee wish to continue the employment relationship by means of a furlough in order, for example, to maintain health insurance, disability insurance, retirement and other benefits, the Attorney General’s Office will not consider it to be a discharge from employment for purposes of the Massachusetts Wage Act. Therefore, earned and accrued vacation pay need not be paid out on the date of furlough. The AG’s FAQs also states that if, however, the employee wishes to separate from employment, all earned wages must be fully paid on the next regular pay day.
In either situation, layoff or furlough, the separated employee is eligible for unemployment benefits.
If you’d like to speak to Mary Jo, the phone number at Bulkley Richardson is 413-781-2820, and their website is here: https://bulkley.com/
If you have any questions about benefits planning for the Coronavirus crisis, you can call us at 866-724-0008 or click the link below.
