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Understanding Furloughs

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One of the tools that companies are using to help them ride out economic uncertainty is employee furloughs. Many employers look to furloughs as a way to avoid permanent reductions (layoffs) in their work force. Here are the answers to some commonly asked questions about furloughs:

What is a furlough?

A furlough is an unpaid leave of absence from an individual’s place of employment. The reduction can be done on an hourly, daily or weekly basis. Furlough requirements differ for exempt and non-exempt employees.

What is the difference between a voluntary and involuntary furlough?

  • A voluntary furlough allows employees’ to determine if they want to participate in the reduced hours
  • An involuntary furlough requires all selected employees to participate.

What is the difference between a furlough and a layoff?

  • A layoff constitutes a group termination of employees. In a layoff, the selected employees are not expected to return to work.
  • A furlough allows employers to retain employees but reduces labor costs.
  • Depending on company size, layoffs can be covered by the federal WARN Act requirements. Furlough usually do not trigger those notice requirements

How are furloughs implemented?

  • For private employers, there are no specific procedures for implementation.
  • Pre-existing employment agreements and collective bargaining agreements should be reviewed to determine "legally promised pay" requirements.
  • Advanced notification to employees of a pending furlough is highly recommended and can reduce confusion and alarm.

How do furloughs affect nonexempt employees?

  • A furlough of nonexempt employees is typically a reduction of regularly scheduled hours. If necessary, employees can be sent home early.
  • Nonexempt employees are only paid for the hours they actually work

How do furloughs affect exempt employees?

  • Exempt employees can only be furloughed in weekly increments.
  • During a furlough an exempt employee must not conduct any work. This includes checking emails (even if it on your blackberry), visiting the office etc.
  • If ANY work occurs during the furlough, the employee would be paid their guaranteed salary for the week with a few exceptions.
  • If a furlough for exempt employees is going to occur, it is wise to notify the exempt employees in writing that no work is authorized.

How do furloughs affect unemployment benefits?

  • In North Carolina if a furlough individual works or is paid less than three customary scheduled full-time days" or less than 60% of the customary scheduled full-time hours an unemployment benefit claim must be filed. These rules vary based on state laws. North Carolina information can be found on the Employment Security Commission’s website-http://w.dol.gov/WHD/flsa/FurloughFAQ.pdf

Another resource on furlough questions can be found on the U.S. Department of Labor site -http://www.ncesc1.com/Business/UI/UiClaims4.asp