Layoffs, Furloughs, and Other Staffing Responses to COVID-19

The COVID-19 situation is ever-evolving, with new governmental measures being implemented each day. This article will be updated as quickly as possible as new developments arise. Employers should consult with counsel for the latest developments and updated guidance on this topic.

Among the many issues employers and employees face in the wake of the spread of COVID-19 is the possibility of furloughs, temporary office and location closings, and short-term layoffs. A furlough involves reducing the days or weeks that an employee may work. A layoff can be temporary or permanent. Employers may also consider reducing the daily hours of some employees.

This article will address these strategies in the context of COVID-19-related actions and will hopefully help answer some common questions that both employers and employees may have regarding furloughs, temporary shutdowns, and layoffs.

How does WARN affect staffing decisions?

A common concern that employers have for planning COVID-19 decisions is whether the employer has a notice obligation under the federal Worker Adjustment and Retraining Notification (WARN) Act and similar state mini-WARN Acts. Federal WARN requires employers to provide 60 days’ advance notice to covered employees, unions, and government officials prior to a plant closing or mass layoff at a single site of employment. State mini-WARN laws contain separate and distinct requirements from Federal WARN that can sometimes require a longer notice period. A WARN notice requirement can be a significant concern if a company is moving rapidly to address COVID-19 disruptions.

What is the effect of furloughs or reduced hours?

Employers generally can schedule non-exempt employees for fewer days or hours without liability concerns. Employers do not need to pay non-exempt employees for time not worked. A few states may require compensation if an employee reports to work and is sent home, but otherwise time off for non-exempt employee does not need to be compensated.

Exempt employees involve a more challenging analysis when considering furloughs or reduced hours as an alternative to layoffs. Employers should be aware that exempt employees under federal law and most state laws must be paid the same minimum salary for each pay period. Moreover, if an exempt employee performs any work during a workweek, that exempt employee must receive their entire salary that week. Failure to compensate an exempt employee for a week where any work is performed jeopardizes that employee’s exempt status. If an employer furloughs an exempt employee for an entire workweek, however, then no salary is owed for that full week and the employee’s status is not affected. Certain types of furloughs may involve changes to pay practices. For example, it may be possible for an employer to reduce an exempt employee’s salary and adjust schedules as a mechanism to address business disruption as long as the reduction/adjustment is for a substantial period of time. Generally, prospective changes are acceptable, but state law may require specific periods for advance notice and may limit changes to particular types of pay.

When employees are furloughed, employers should expect that they will not work. This includes checking email and voicemail. An exempt employee is entitled to pay for any workweek in which they perform any work. Employers should therefore inform employees that work is not authorized during the furlough period without advance written approval. Employers also should notify non-exempt employees about the same issue as non-exempt employees generally are entitled to compensation for performing work when not in the office.

Are furloughed employees entitled to unemployment benefits?

Unemployment benefits will vary by state, and there may are also be waiting time periods in place before benefits are provided. Consider reviewing unemployment eligibility in the various states where operations will be impacted and including some sort of statement within the furlough notice. Employers should also consider whether “partial” unemployment claims are permitted where the workweek is changed for non-exempt employees. Employers may be able to structure furloughs to maximize unemployment benefits to employees. For example, some states have work-sharing programs that allow employees with reduced hours to receive unemployment benefits even if they do not meet the standard requirements for unemployment eligibility.

If the employer has to furlough or temporarily lay off employees, are there any notification requirements?

It depends. When an employer places employees on furlough or conducts a layoff, Federal WARN and state mini-WARN statutes may require employers to provide advance notification to employees and government officials in certain situations. Not all layoffs trigger these requirements, however, and exceptions may apply. Temporary layoffs of less than six months are not considered to be employment losses under Federal WARN, and the same is true under many, but not all, state mini-WARNs. The size of the layoff also matters. Federal WARN is not triggered unless, at a minimum, there are 50 employment losses at a single site of employment in a 90-day period. State mini-WARNs can be triggered at lower levels.

What level of layoffs will trigger notice under Federal WARN?

Generally, a 60-day specific written notice must be provided for a plant closing or a mass layoff. A plant closing is defined as 50 or more countable employment losses at a single site of employment in a 90-day period that results from ceasing operations in one or more operating units. A mass layoff is defined as 50 or more countable employment losses at a single site of employment in a 90-day period that also involves 33% of the active workforce at the site. Employees with less than 6 months of service in the prior 12 months, or who work less than 20 hours per week, are not countable. Temporary layoffs of less than 6 months are not counted as an employment loss under Federal WARN.

If Federal WARN is triggered, are there any exceptions that apply?

Yes. Federal WARN permits shortened notice if terminations result from circumstances that were not reasonably anticipated 60 days before employees are terminated. However, shortened notice requires giving actual written notice, with as much advance notice as can be given and an explanation for the shortened notice. Some state mini-WARN statutes do not include this unforeseeable business circumstances defense.

If we avoid Federal WARN, do employers still need to comply with state mini-WARN statutes?

Yes. Employers must comply with both the federal law and state laws, whichever is more favorable to their employees.

Is there an exception to WARN for epidemics?

On March 18, 2020 California issued an Executive Order allowing California employers to use the newly created “unforeseen business circumstances” exception to the state’s WARN Act requirements in response to COVID-19.

Federal WARN and most state mini-WARN statutes have provisions addressing terminations due to natural disasters or calamities and while those provisions have not yet been interpreted in the context of an epidemic do not be surprised if other states follow in the footsteps of California in the coming days and weeks.

Rick Duarte is the owner of The Duarte Firm, P.A., where he focuses his practice on business law. He received his law degree from the Emory University School of Law and has been named a “Rising Star” in Business Litigation by Florida Super Lawyers for 2016 – 2020. Rick also serves as general counsel to emerging and medium-sized businesses, guiding clients through corporate governance, risk management issues, and strategic decisions where business and law intersect.