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Under the Fair Labor Standards Act (“FLSA”), employees are categorized into two groups: exempt and nonexempt employees. Each group is compensated differently for the work they do. Exempt employees hold an executive, administrative, or professional position within a company and are paid on a salaried basis. Non-exempt employees are paid on an hourly basis.
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Exempt employees are exempt from the rules and regulations set by the FLSA, specifically overtime pay. Instead, they must receive a fixed weekly salary if they perform any work during the week. If exempt employees are furloughed in less-than-weekly increments - for instance, one day per week - they cannot have their pay docked for the absence. This means that an employer cannot furlough an exempt employee for one or two days. Even if there is no work, or the employer asks the employee to remain at home and take the time off, the employee must be paid his or her entire salary for any payroll week in which the employee performs any work at all. However, there is a way for employers to save money by furloughing exempt employees – as long as the furlough is for the entire payroll week. As long as the furloughed employee does no work whatsoever during the payroll week – including working from home – the employee need not be paid that week. However, the law on this is far from settled and should be approached only after consultation with counsel.
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Hourly or non-exempt salaried employees need not be paid under the
FLSA
if they are not performing any work. However if they are “on-call” that analysis is different.
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The selection of furloughed employees should be completely neutral. This means the selection process should not target specific groups of people based on race, sex, age, disability, religion, etc. These groups fall into protected classes, which are protected by the Equal Employment Opportunity Commission (EEOC) from workplace discrimination.
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Another detail to keep in mind about the selection of furloughed employees is work-related injuries. If you furlough an employee that has sustained a work-related injury, then you might be liable to pay additional benefits under the
workers’ compensation laws. Also, additional care is necessary when dealing with employees receiving workers’ compensation or Family and Medical Leave Act benefits. Hence, having a neutral selection process will minimize legal issues when implementing employee furloughs.
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In general, furloughed employees are entitled to the same employee benefits as those they would receive under normal circumstances. And since employee furloughs are temporary measures, furloughed employees are not entitled to severance pay, outplacement, and early retirement benefits.
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Often, employee benefit plans require employees to work a minimum number of hours in order for them to meet eligibility. In circumstances where the furloughed employee’s hours of work fall below the minimum threshold, then the benefits might cease. Upon termination of group health benefits as a result of a reduction in hours, furloughed employees should be given COBRA notice.
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In terms of unemployment benefits, furloughed employees might be eligible depending on the state law (Under NJ/PA unemployment law it is likely that the employees can receive the compensation).
