Furlough

A furlough is a brief leave of absence granted to employees by an employer to meet unique requirements.

These requirements may arise from the employer's unique demands or societal or economic factors. For example, the leave periods could be brief or protracted.

This is a predetermined period during which a worker is temporarily laid off, takes unpaid leave, or modifies his regular working hours.

Businesses use them for various reasons, including factory closures or situations when a significant reorganization makes it uncertain which employees will be retained.

They are also available to service members whose new assignments have not yet been decided or those who are permitted to leave their station post for a predetermined time.

An employee in this period must return to work or be reinstated from a reduced work schedule after the required temporary leave.

It is frequently utilized when there is not enough money for payroll or work for all employees during a quiet period. By lowering staff schedules, the business can avoid firing workers.

Employees in this special period may be compelled to take unpaid vacation hours over several weeks, a set number of due days/hours spread out for the year, or a single block of ideal time.

For the rest of the year, an employer can send non-exempt workers away from work one day a week, paying them for only 32 hours per week instead of the usual 40 hours.

The requirement that all employees take several weeks of unpaid leave at some point during the year is another illustration.

Employers must use caution while sending exempt workers away to maintain their salary-based compensation and not jeopardize their exempt status under the Fair Labor Standards Act of 1938(FLSA).

Since the FLSA says that exempt employees are not required to be paid for any week in which they do not perform any labor, one that lasts the entirety of a workweek is an employer's approach to achieving this.

Employees who are away from work might still be eligible for benefits and be able to receive unemployment insurance to make up for the lost time at work, depending on the specifics of the situation. 

The history of Furlough in the United States

In the US, involuntary furloughs affecting federal government employees may be of abrupt and immediate character.

In February 2010, emergency funding measures were stopped from being implemented due to a single protest from the US Senate.

As a result, on March 1, 2010, 2,000 federal employees of the Department of Transportation were immediately placed on it.

The second-longest shutdowns occurred from December 16, 1995, to January 6, 1996, affecting all non-essential workers. 

During that time, several services, including the National Institutes of Health, the processing of visas and passports, parks, and many others, were shut down.

It happened again on October 1, 2013, and January 19, 2018.

Around 4,000 employees were laid off at midnight on July 22, 2011, due to the United States Congress' failure to re-authorize money for the Federal Aviation Administration.

Timeline

The timeline is as follows. 

1. 2011
On April 8, 2011, Congress was about to compel a government shutdown if the plan to cut the federal budget deficit was not addressed, resulting in the layoff of 800,000 out of two million civilian federal employees.

2. 2013

The automatic spending cuts in specific areas of federal outlays, known as budget sequestration (or sequester), led to the implementation of the first national government layoffs of 2013.

The Gramm-Rudman-Hollings Balanced Budget Act of 1985 introduced this process. The sequesters were planned to be implemented if the federal deficit rose above a predetermined range of deficit targets.

Sequestration explicitly refers to a simple fiscal strategy initially scheduled to start on January 1, 2013, under the Budget Control Act of 2011 (BCA).

The American Taxpayer Relief Act of 2012 delayed these cuts by two months until the law's effective date of March 1.

Most federal departments and agencies send their staff members away from work to reach their spending reduction goals.

Nearly all the civilian workforce and the majority of full-time, dual-status military technicians in the National Guard and Reserves were influenced by the Department of Defense.

The initial requirement for sending each impacted employee away from work was 176 working hours, and it was ultimately reduced to 88 hours.

This time was further scaled back to 48 working hours per DoD civilian and full-time Reserve Component member due to cost-cutting initiatives in other sectors.

A government shutdown was observed on October 1, 2013, at 12:01 am EDT due to Congress' failure to reach a consensus on a spending bill. As a result, most "non-essential" government workers were sent away from work during the shutdown.

As a result, at the beginning of October 1, about 800,000 government employees were placed on leave. Later, all members of Congress agreed to reinstate the furloughed workers' salaries.

3. 2018 and 2019

Three hundred fifty thousand federal workers were furloughed for 35 days, from December 22, 2018, to January 25, 2019, due to the government shutdown that began on the same date.

The US Department of Labor published Fact Sheet #70 on layoffs in September 2019.

Schools

2009 saw the implementation of "furlough days" by the boards of several educational districts and colleges, which is a significant advance.

As a result of the teachers' and staff workers' being required to take the day off, students were forced to pay the same amount for their education-if not more-while receiving fewer instructional days.

States with mandated furlough days are required to implement them. However, the classes were not missed for the 2009–2010 academic year due to a provision incorporated by the Board of Regents of the University System of Georgia.

The State Employee Trades Council (SETC) in California decided to impose a two-day minimum monthly requirement for CSU system employees and academics, which they appreciated greatly.

To avoid layoffs, they started in August 2009 and ended in June 2010. The CSU's budget shortfall of $564 million was reduced to $270 million due to this action conducted by SETC.

Private Sector and Other Uses

Businesses like Intel, Toyota, and Gannett used this measure during the 2009 global recession.

Federal contractors like Lockheed Martin and United Technologies thought about doing this to their staff during the 2013 US federal government shutdown.

Retail behemoths like Kohl's and Macy's sent thousands of workers away from work in 2020 as a result of lower sales brought on by the COVID-19 outbreak in the United States.

Disney laid off nearly 100,000 workers in April 2020, yet almost all executives kept their jobs and got bonuses.

In the context of employment, it may also refer to annual leave, extended service leave, or vacation time that the employer schedules.

For instance, a company's personnel is split into four groups following a "work three weeks, of one week" pattern. In turn, each group is away from work for a week while the others continue to work.

It can also be used to describe a break from missionary work, a leave of absence from the military, criminal defendants, parole, probation, conjugal visits, or work release.

Requirements

Non-exempt employees, which means they are hourly paid, and exempt employees who have a constant salary are subject to differing policies.

Hourly workers can receive agreements from their employers legally. But non-exempt workers must reduce their workloads to match the reduced hours worked because they are entitled to pay for every hour worked.

On the other hand, exempt employees, who receive predetermined compensation on a weekly or monthly basis, are typically prohibited from working during these periods. With a few exceptions, they must be paid their full pay if they perform any labor.

From these differences, it can be found that exempt employees are always benefited more from the policy since they perform constant labor effort for their company, which to some extent, forces the company to be better to them.

There are some important considerations to keep in mind here.

1. How long can a furlough be?

The requirements differ from state to state; thus, there is no universal response to this query. For example, a long or indefinite leave may be considered a termination in some states.

For instance, California mandates extending it over the current pay period as termination. Businesses must provide workers with a final check and reimbursement for accumulated vacation and/or paid time off.

2. Do such employees get paid?

Whether an employee gets paid depends on the employee's type. For example, non-exempt employees are usually paid for hourly labor each week, but they must still be compensated for the fewer hours they work.

Exempt employees, who get a fixed wage, are typically not paid during this period, even though they may have an official contract with their company.

With some restrictions, they must be paid their entire weekly income if they work during the period. Also, they continue to receive job benefits on health care or other issues.

Differences between furlough, layoff, and reduction in force

The terms are frequently used interchangeably, but they have different meanings. These are all examples of cost-saving employment practices that are commonly misconstrued.

The terms are broadly described below, but it's crucial to note that not everyone would use them to signify the same thing. More effective use is comprehending the context of the particular circumstances.

This is true not only when informing employees about employment decisions but also when adhering to legal obligations like those imposed by the WARN Act or state termination pay requirements or when handling unemployment claims.

With a furlough, it is assumed that the person will still be employed after its conclusion. Therefore, when an employee is laid off, their employment is officially over and cannot be restarted.

Employers prefer the former over layoffs because they spare them the price of hiring and training new employees.

1. Layoffs

A layoff is typically regarded as a separation from employment because there isn't enough work. The word "layoff" is generally used to refer to a form of termination in which the employee is not at fault.

An employer may label a layoff as "temporary" even though it may be a permanent situation if it causes them to expect or hope to call workers back to work from it, such as a restaurant during the epidemic.

If the benefit plan permits, some companies may provide continued benefits coverage for a predetermined length of time to encourage laid-off workers to stay available for recall. 

The majority of laid-off employees usually are qualified to receive unemployment compensation.

When a company terminates employment without rehiring the individual, it is incorrectly referred to as a layoff rather than a reduction in force.

2. Reduction in Force

A reduction in force (RIF) happens when a position is abolished without any plans to fill it in the future, which results in a permanent decrease in the number of employees.

A company may shrink its employment by laying off workers or through attrition. In rare cases, a layoff may change into a RIF when a decision is made not to recall personnel permanently.

Reviewed and edited by Parul Gupta | LinkedIn

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