The main difference between a furlough and a layoff is the employee's relationship with the employer. A furlough is generally a temporary period of unpaid leave or reduced work in which the employment relationship continues. A layoff generally involves a loss of employment because the employer no longer has enough work, needs to reduce costs, restructures, or eliminates positions.
What is a Furlough?
What is a Layoff?
Do Furloughed Employees Get Paid?
Do Furloughed Employees Keep Their Benefits?
Is a Furlough Permanent?
Can Laid-Off Employees Receive Unemployment?
What is the WARN Act?
Does a company have to give notice before a layoff?
A furlough is generally a temporary period during which an employer reduces an employee's scheduled work or requires the employee to take unpaid time off while maintaining the employment relationship. The goal is often to reduce labor costs without permanently eliminating employees. A company experiencing a temporary slowdown, for example, might require employees to take one unpaid week each month. Another employer might temporarily reduce employees from five workdays per week to four.
A layoff generally occurs when an employer ends an employee's employment because of a business decision rather than an individual employee's performance or misconduct. Unlike a termination for poor performance or misconduct, a layoff typically relates to the employer's business circumstances. In practical HR usage, layoffs are often associated with longer-term or permanent workforce reductions. But that terminology isn't universal. Under federal WARN regulations, for example, a "layoff" can include a temporary cessation of the employment relationship.
Employees generally don't receive their normal wages for periods in which they are furloughed and perform no work, but wage-and-hour rules depend on whether the employee is exempt or nonexempt.
Whether furloughed employees keep their benefits depends on their employer's benefit plans, the length and structure of the furlough, and applicable law. Because furloughed employees generally remain employed, an employer may choose or be able to continue certain benefits during the furlough. However, a reduction in hours can affect an employee's eligibility under the terms of a health plan. If an employee loses group health coverage because their hours are reduced, the reduction in hours can be a qualifying event for COBRA continuation coverage, assuming the plan and individual are otherwise subject to COBRA requirements. Job loss can also be a qualifying event. COBRA generally applies to group health plans sponsored by private-sector employers with at least 20 employees, as well as many state and local government plans. State continuation coverage requirements may also apply. Employers should therefore review their plan documents before telling furloughed employees that their benefits will automatically continue.
Furloughs are generally intended to be temporary. However, changing business conditions could result in a furlough being extended or eventually becoming a layoff.
Employees who are laid off because their employer doesn't have enough work will often be candidates for unemployment benefits. The Department of Labor notes that unemployment eligibility typically includes being unemployed through no fault of your own, which in most states can include separation caused by a lack of available work. Employees must still meet their state's eligibility requirements and file a claim through the state unemployment insurance program.
The federal Worker Adjustment and Retraining Notification (WARN) Act generally requires covered employers to provide at least 60 calendar days' advance written notice for certain qualifying plant closings and mass layoffs. The federal WARN Act generally covers employers with 100 or more employees, subject to specific counting rules, and applies only when statutory thresholds and other requirements are met. A temporary workforce action isn't automatically outside WARN. Federal guidance explains that WARN can potentially apply when a temporary layoff meeting the applicable size thresholds is expected to last more than six months. Certain reductions in employees' hours of more than 50% during each month of a six-month period can also constitute an employment loss under WARN. Some states have their own layoff and plant-closing notification laws that may have different requirements. Employers planning a significant workforce reduction should therefore evaluate both federal WARN and applicable state requirements.
Sometimes. The federal WARN Act requires qualifying employers to provide advance notice for certain covered plant closings and mass layoffs. States may impose additional or different requirements.