Differences Between Layoffs, Furloughs, and Reductions in Force?

As the Coronavirus (or “COVID-19“) pandemic has swept the globe, economic woes due to lost business activities have added insult to the injury. With an estimated 95% of US residents under some form of shelter-in-place, the coronavirus pandemic is not just affecting people’s health and safety; it is also affecting people’s livelihoods as the virus disrupts the global economy. Consequently, the Coronavirus pandemic has led several businesses to rethink their staffing needs.

Similarly, the surge of layoffs and furloughs due to the COVID-19 pandemic has left many workers wondering about their future with their current employers. Specifically, companies are hinting at exploring options that include furloughs, layoffs, and a reduction in its workforce. Below we will explore the difference between these employment terms.

What is a furlough?

Differences Between Layoffs, Furloughs, and Reductions in Force?
With so many businesses struggling, many employers are trying to avoid permanent layoffs by putting their employees on furlough. A furlough is an employer-mandated temporary unpaid leave from work. Private and public employers can mandate that their employees go on furlough. Companies often furlough their employees to weather financial storms temporarily. In the case of public employees, furloughs typically happen during government shutdowns. When someone is furloughed, they generally need to work some hours or may be required to take a certain amount of unpaid leave. There are two common structures when it comes to furloughs:

  • First, an employer may furlough its nonexempt employees one day per week for the remainder of the year or pay them for only 32 hours instead of their regular 40 hours per week.
  • Another option is to require all employees (exempt and nonexempt) to take unpaid leave for a specified period (e.g., 30 days, 60 days, 90 days, etc.)

When it comes to furloughing exempt employees, employers must ensure that the employer does not perform any work during the furlough. If the employee does any work during the furlough, the employer must pay the employee’s full weekly salary for the week in which work was performed. To avoid this scenario, companies will often require the return of any work cell phones and laptops, as well as cancel any remote access to the company’s network that the employees may have.

During a furlough, employers may retain employee medical insurance benefits, although that’s not guaranteed and varies by company.

What is a layoff?

What's the difference between furlough and layoffs?The term layoff has lost its true meaning because it is thrown around so much. However, with a layoff, the employee no longer has a job with the company. Specifically, an employee is laid off because his or her employer does not have sufficient work for him or her to perform. However, the employer believes that this situation will change and intends to re-hire its employees back to work when or if the need arises. Employees are usually able to collect unemployment benefits while laid off without pay.

What is a reduction in force (RIF)?

The main difference between reduction in force (RIF) and the other kinds of workplace cuts is that a RIF is permanent. It means that any employees who are let go during a RIF will not be able to come back to the company. It is a permanent move, which is usually brought on by a strategy change, drastic budget issues, or bigger issues that cannot be solved by a temporary solution.

A reduction in force happens when a job is eliminated without the intention of replacing it and involves a permanent cut in staff headcount. A layoff may turn into a RIF, or the employer may decide to reduce their workforce immediately. A RIF can be achieved by terminating employees or by a gradual transition.

When an employee is dismissed according to a reduction in force, it is sometimes referred to as being ‘riffed.’

The CARES Act for furloughed, laid-off, and Riffed employees.

Passed by Congress a couple of weeks ago, the Coronavirus Aid, Relief, and Economic Security or the “CARES Act,” expanded unemployment benefits for people who’ve permanently or temporarily lost their livelihood as a result of the COVID-19 pandemic. The CARES Act extends unemployment benefits to those that have been furloughed. Additionally, the law offers up to 13 additional weeks of employment benefits as well as an additional $600 per week (through July 31, 2020) beyond the state law maximum. The CARES Act also offers benefits to those workers who would typically not be covered, such as independent contractors, gig workers, and those without enough work history.

Lastly, as an employee, it is important to remember that layoffs, furloughs, and RIFs are all different terms with distinct meanings which may impact the benefits available under the CARES Act. Also, those who have employment contracts may be entitled to a severance package or to retain your employment altogether. As such, you should evaluate the verbiage used by your company if you’ve been let go in order to gauge your future at the company once the COVID-19 pandemic is over. If the COVID-19 has impacted you, learn more about your employment rights by contacting us today.

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