How Long Can a Company Furlough an Employee?
October 23, 2018 by Martina Markovska
Employee furloughs are a temporary unpaid leave from work, used by companies as a cost-cutting measure. An employee furlough policy generally requires employees to take days off every week, two weeks, month, and so on.
There are various factors that may push employers to implement employee furloughs. This includes things like company reorganization, budget cuts, plant shutdowns, and seasonal work. Moreover, employee furloughs come with a lot of questions and uncertainties attached.
One frequent question concerning employee furloughs is furlough length. Namely, many employers wonder about the length of an employee furlough. Or in other words – how long can a company furlough an employee? We’re here to answer that question and more while guiding you through the main points of the employee furlough process. Let’s get started.
How Long Can a Company Furlough an Employee?
Well, in truth, there’s no right or wrong answer to this question. The only possible answer is: it depends. Employee furloughs depend on multiple factors, such as sector, industry, type of work, employee status, and personal preferences.
However, since employee furloughs offer temporary leave, they are not a long-term solution for reduction in staff. That’s what layoffs or RIFs are for. In fact, the maximum amount of time that a company should furlough an employee is one year. Therefore, employers should implement employee furloughs only if they plan to recall the employee on furlough within one year. If a company plans to furlough an employee for a longer period of time, they should consider alternative reduction in force methods.
This is largely because a furlough that lasts too long can hurt your corporate brand, sour business relationships, and just generally cause problems. It makes sense to use furloughs for the short-term, but not the long-term when a better reduction method would work better, allowing employees to move on with their careers.
Preparing a Furlough Notice Letter
In order to implement an employee furlough, employers must inform employees about the decision well in advance and in written form. Usually, employers are required to give at least 60-day furlough notice. Hence, employers need to prepare a furlough letter addressed to the employee informing them about the furlough and its conditions.
Employees need to be able to fully understand the terms of the employee furlough policy. Also, they need to ensure the furlough notice letter ticks all the boxes in terms of content:
- What is the purpose of the letter?
- Who does the furlough notice concern?
- When will the employee furlough come into effect and how long will it last?
- Why is an employee furlough the only viable option for the employer?
- How will the employee furlough policy be administered?
In the event that employers are unable to provide a written notice – such as during an emergency shutdown – a verbal or telephonic notice is acceptable. We always suggest alerting staff members of organizational changes through whatever means they are expecting. For example, if your organization typically gives out notices with checks, do that. If email is preferred and expected, take that route.
It is recommended you consult a legal expert about writing up a furlough notice before you take any actions in notifying the employee about your decision. Just to be on the safe side of things, of course. Or use our sample furlough notice letter as a template.
Tips for Implementing Employee Furlough
Implementing employee furloughs successfully and trouble-free requires a lot of preparation. For a less stressful journey into employee furloughs, try these tips for a smoother transition:
- Be organized. Have furlough letters written and reviewed prior to meeting with the employee. In addition, be ready with a list of frequently asked questions regarding your employee furlough policy.
- Be clear. Maintain a strong, clear and supportive voice when conversing with the employee. If necessary, go over the key points to be discussed in the meeting beforehand.
- Be prepared. Expect a range of emotions and responses from furloughed employees, such as anger, guilt, and denial. Deal with such responses accordingly.
- Be helpful. Encourage furloughed employees to ask questions and express their concerns openly. Allow some time for the employees to review the furlough notice letter. Try your best to resolve any issues the employee may have about the employee furlough policy.
- Be considerate. Make sure you emphasize that the decision to implement an employee furlough does not in any way reflect the employee’s performance. Show empathy and keep employees motivated after downsizing.
Exempt Employees vs. Nonexempt Employees
There are various legal technicalities that employers should be wary of when implementing employee furloughs within their companies. A frequent issue that arises in an employee furlough policy is the classification of employees. There are two types of employees in the workplace – nonexempt and exempt employees.
As implied, nonexempt employees are not exempt from the rules and regulations enforced by the Fair Labor Standards Act (FLSA). Nonexempt employees typically work for hourly wages, must be paid at least minimum wage and are eligible for overtime pay. If a nonexempt employee works for more than 40 hours in one week, then they must receive overtime pay. The overtime pay rate is, typically, time and a half for each hour exceeding the standard 40-hour workweek.
Keep in mind, though, that different states have different overtime pay guidelines. So employers need to check with their state Department of Labor for regulations applicable to their location.
If nonexempt employees work during a furlough they need to be compensated for the actual number of hours they worked. For instance, if Friday is a day off for furloughed nonexempt employees, then these employees would be entitled to receive wages for hours worked Monday through Thursday.
Exempt employees hold a specific position within an organization, usually executive, supervisory, professional, or outside sales. Exempt employees receive a salary, not hourly wage. Unlike nonexempt employees who are covered by FLSA rules and regulations, exempt employees are not. Consequently, they are not entitled to minimum wage, overtime pay, and other rights guaranteed to nonexempt employees by the FLSA. However, some employers may offer a special employee benefits package in lieu of overtime pay.
When it comes to an employee furlough policy and exempt employees, this group of workers are entitled to a full week’s pay even if they do one hour’s worth of work that week. For example, exempt employees who do no more than reply to a work-related email or answer a phone call during furlough would still receive the same pay as if they had worked an entire 40-hour workweek. To avoid such situations employers should consider enforcing a no-work rule while the employee furlough policy is in effect.
Employee Furlough: The Bottom Line
Having an employee furlough policy in place is a strong asset used to manage company operations and drive business forward. Employers looking to implement employee furloughs should consider furlough length, type of employees on furlough (exempt or nonexempt) and seek counsel from corporate specialists.
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