11 Things Employers Must Know About Furlough Employees and Unemployment

How Can I Avoid Laying Off Employees?

Businesses are looking for creative ways to keep their employees, clothing manufacturers are now making PPE, and retail workers have become delivery drivers. This is called redeployment and is a great strategy of using employees in more productive ways when they cannot do their job.

Other flexible ways employees can keep their employees is by furloughing staff, providing sabbaticals and leave. They could temporarily cut discretionary payments that they provide as extra benefits in order to keep staff. Before a company furloughs employees, it is prudent to contact a California corporate attorney to avoid potential labour law violations. Of course, employers must not cut legally required benefits or those that have been made as part of a collective bargaining agreement.

Can We Terminate Employees and Rehire Them as an Independent Contractor?

Yes, but you need to be careful about how you do so. By changing your employee’s classification, but keeping their duties the same, the classification change will not have legal standing if it goes to trial. The employment relationship must be an independent contractor relationship.

If an Employee is Furloughed and Refuses to Return to Work When Summoned, Are They Still Eligible For Unemployment Benefits?

If the request to return to work is a bonafide offer of suitable work, and the employee refuses, then this will affect their UI benefits applications. Check the guidance for your state.

How Can Employers Identify Which Employees Would Be Better Off on UI Benefits Than Staying on Payroll?

There is a calculator that Seyfarth offers to determine whether a furlough or partial-week payments would affect their ability to claim UI benefits. Some employees will be better off on full unemployment benefits rather than being furloughed.

If Employees Are Furloughed, Do Employers Still Need to Provide 401(k) Matching?

While the 401(k) plan is still in effect, employers must keep up their compulsory payments. Look at the terms of the plan to ensure any decisions are compliant.

If My State Allows Work-Sharing, How Can I Create a Compliant Program? If My State Doesn’t Have a Work-Share Program, Are There Similar Programs I Can Use?

Employers looking to adopt a work-sharing program should familiarize themselves with 26 U.S. Code § 3306(v) to ensure it is legally compliant. Employers must have an approved STC plan before they can implement a work-sharing program.

If your state does not have a work-sharing program, then they can create their own similar plan by reducing pay to part of their employees. The reduction must not reduce their pay to the point that they cannot claim unemployment.

A work-share program allows the employees to receive benefits pro-rata for the reduction of their wages, up to 50%. Employers should note that these programs have strict accounting and reporting requirements.

Can We Lay Off Employees That Are on FLMA or FFCRA Leave?

If the reason for the layoff is lack of work, then yes, however, if the employees remain on payroll then they may continue the programs when they return to employment.

Do Employees Still Receive Health Insurance While They Are on Furlough? How Will They Pay Their Premium Without a Paycheck?

Yes, an employee can stay on the company’s health insurance plan while on furlough. The employer can either arrange to pay both the employer and employee premiums or ask the employee to continue to pay the employee premium.

The plan wording may trigger the COBRA Act, which would qualify the employee for continuing health care insurance.

If An Exempt Employee Has Their Hours Cut, Do They Need To Receive Their Entire Weekly Salary?

Yes, even though an exempt employee’s hours may be reduced, their pay should not vary. An employer may create a formal salary reduction as long as it remains in place for a number of months, rather than fluctuating with the company’s profits. An exempt employee’s salary cannot be cut below the exemption status minimum.

What If Employees Would Prefer to Be Laid Off And Then Rehired So They Can Collect Unemployment Benefits?

If the separation is voluntary, then the employee may not be able to collect unemployment insurance benefits. Also, because of the large volumes of unemployment due to the pandemic, claimants may experience delays in having their claims approved.

Overall, it would benefit employees more to continue working or accept furlough as they will still receive benefits such as pension and health care.

Will Employees Be Eligible For Unemployment Insurance If Their Hours Are Reduced?

This will depend on the amount of the wage reduction and the state where the employees reside. If the employee’s wages are reduced by 20% or more, then most states would accept a partial claim if it meets the other eligibility requirements. Check your state guidelines for the applicable amount as it does vary from state to state.

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