Labor and Employment

Furlough or Layoff Is There a Difference

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Terminator-turned-Governor Arnold Schwarzenegger recently asked California state workers to take some time off for themselves…but without pay, and without a choice. His "furlough" program was designed to help the cash-strapped state by reducing the number of hours worked by paid employees.

Furloughs and Layoffs are Distinct

In years past, a "furlough" was usually thought of as time away from some burdensome task or location, such as from military service or a missionary assignment. Recently, the term has been used to describe an employer's decision to force employees to take unpaid time off. Many state employers, including California and Wisconsin, are among those recently declaring furloughs as a way to keep payroll costs in check.

A furlough is a temporary, defined period of unpaid time off, at the end of which the employee returns to work on a paid basis. Some employers allow the employees to "customize" the terms of their furlough to, for example, reduce their workweek to a three- or four-day workweek with the employee being allowed to choose the days off. Others might require the employees to take two weeks off per month for a given period of time, but allow the employees to choose the weeks off.

Generally, employees on furlough continue to accrue vacation days and sick days/personal days, and continue to receive other benefits such as health insurance. Employers might allow employees to choose whether to use their vacation days or personal days accrued during a furlough, so that they continue to receive pay. If you're notified of an upcoming furlough, you should promptly ask about this possibility.

On the other hand, a layoff is the removal of an employee from the workforce, without pay (but maybe other benefits such as severance) and without guarantees of returning to work. One variation of the layoff is a "shutdown," common in automotive factories, where the factory is closed for a period of time until demand for production resumes. Laid off employees do not continue to receive benefits such as vacation time and insurance coverage, unless they elect COBRA insurance coverage that they must elect and purchase within a given time after their last day of work.

Legal Protections Against Discrimination

An employer isn't required to describe in detail the basis for determining which employees will be placed on furlough or layoff. The reasons given might be as vague as "Due to slow business, we have had to make cuts," or might be as specific as "Your seniority within your job department places you among the group of 5 years or less employees who are being furloughed (or laid off)."

Over the past several decades, state and federal statutes have evolved which give employees protection against employment discrimination on the basis of race, gender, age, sexual orientation and ethnicity. An attorney can provide you with more detailed information on which state's laws would apply to you, and what protections they offer.

Use caution when considering legal action. Many states have a short window of time called a statute of limitations to file a complaint of employment discrimination; often, it's within 180 days from the start of furlough or layoff. In some cases, you may be required to file a complaint with your state's human rights office before starting a lawsuit.

The federal agency that handles employment discrimination complaints is known as the Equal Employment Opportunity Commission, or EEOC. Generally speaking, an employee must first seek assistance through the EEOC and/or a state agency before filing a lawsuit. An attorney can help you understand which route you must follow to preserve your claim of discrimination.

Review Employee Handbooks

An employer may be limited in its furlough or layoff decisions by the terms of employee handbooks, employee policies, or collective bargaining agreements. If you learn that you may be subject to a furlough or layoff, review the employee handbook or policy manual, or speak with your union representative. These may contain provisions identifying the procedures for furlough or layoff. However, employee handbooks aren't contracts and employers don't have to follow them if they don't want to.

As furlough is a relatively new cost-cutting tool, it's likely that you will not find anything about it. Review the terms of any employer policies to determine whether furlough or layoff actions are allowed by these written provisions.

Questions for Your Attorney

  • How do furloughs or pay cuts affect my employment status? Could I quit my job and apply for unemployment benefits? Isn't a pay cut or furlough a substantial change to the terms of my employment?
  • Does an employer have to use furloughs equally within departments or across the workforce? What if I'm told I must take furlough time but my co-worker doesn't?
  • Does furlough affect your employment status? What if I'm applying for a loan product - is a furlough something I have to disclose to a lender?
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