Should I Furlough, Terminate, or Lay-Off My Worker?

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Some industries have been impacted by the economic impact related to COVID-19 and as a result, have to consider what cuts to make to keep business afloat amongst the uncertainty. 

You may be having conversations about furloughs, temporary lay-offs, or even terminations. But which one is best for your business right now? We have compiled some key information you should consider before making any decisions regarding layoffs.

Should I terminate my worker?

If you are contemplating termination/separation of a worker due to COVID-19 it is important to consider…

  • Are your workers protected?

Be extra cautious especially in the present climate when some workers could be protected. Ensure that terminations are clearly documented, and non-discriminatory.

  • Is there enough work to provide your worker?

    If there isn’t enough work to provide your worker, you may have the right to proceed with termination. All termination decisions should be based upon business needs and current workload, your client must be able to justify the worker is no longer needed.

  • Has my worker been directly impacted by COVID-19?

    Workers directly or indirectly impacted by COVID-19 may be considered job-protected, so be careful before cementing any decisions to ensure this is handled correctly and compliantly.

  • Can I temporarily layoff or furlough my worker?

    You may only be permitted to temporarily layoff or furlough your workers if there are state or Jurisdictional ordinances which prohibit termination of a worker during COVID-19 pandemic. 

Should I furlough or temporarily lay-off my worker?

If you are considering furloughing or a temporarily laying off a worker due to COVID-19 it is important to know the difference between a furlough and layoff before making a decision. 

  • What does furlough mean?

Furlough is where your worker is required to take unpaid time off from work for a set period of time, the worker is still considered to be contractually engaged with you and expected to be restored to their regular work schedule after the pandemic.  

Furlough allows your client to maintain employment levels and change work schedules to match business operational activity rather than terminating workers.

In theory, the worker would have zero hours, zero pay, but would still be considered an employee, you still have to cover the worker’s medical contribution during this time.  However, the worker will be eligible to claim unemployment.

  • What does layoff mean?

A layoff generally does not have an expected return to work date. The employment with the worker is ended, advise the worker that you will potentially reengage them in the future if you are able to do so, but there is no contractual obligation. During this time the worker will not receive a benefit contribution but can move to cobra. The worker will be eligible to claim unemployment.

Should I reduce my worker’s salary?

If you are considering reducing your worker’s salary in response to COVID-19, it is important to factor in these key considerations before implementing any reductions.

  • Provide notice

Some states require notice for salary reductions, for example, New York requires an employer to provide a worker 7 days’ notice. Check out your state’s stance on this before reducing any of your worker’s salaries.

  • Mutually agree

  • Any salary reductions must be mutually agreed, your worker will need to sign a newly updated contract.

  • Is the salary reduction mutually beneficial? All proposals have to be mutually beneficial, if the salary reduction is significant, for example, if they are below minimum wage or below unemployment this would not be considered to be mutually beneficial and your only option may be layoff the worker during this period.

  • Is my worker exempt or non-exempt from premium overtime pay?;

  • It is important to think about your workers exempt/non-exempt status. Non-exempt workers don’t typically need to be paid for time not worked. For exempt workers, a reduction in payment may impact a worker’s exemption status.

So, should you implement furloughs, terminations, or layoffs? It depends on your business and current situation and you should consider all your options. We always strongly recommend consulting with your legal counsel before deciding what is best for your business.

Disclaimer: All information written here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.

Catriona O'Kanefurlough guidance, laying off workers