cost-cutting, furlough, layoff, contracts, unions, exempt workers, vacation time

The idea of forcing employees to take time off work, unpaid, hasn’t been an issue for some time. Today it is. In recent months, taking a furlough has become a popular alternative to getting cut for an indefinite amount of time or accepting other unpleasant options. Furlough can help to avoid layoffs when there are few other choices. But the process comes with ready-made problems.

Skeptics may wonder about the reasons behind a furlough. It should be the answer to a short-term decline, and nothing more—not a way to revamp the company or a last-ditch effort at saving it. Senior workers and high performers may not be crazy about the idea, preferring to think their jobs are secure and others should go first. Employees may need to be convinced that this is a temporary setback and a protection of the organization’s health.

Employers operating with lean workforces are embracing the concept. They can let go, but not let go, knowing that personnel will be available with things pick up. HR associates should be aware of the Worker Adjustment and Retraining Notification Act (WARN), which requires larger employers to give 60 days' notice. They need to avoid violating wage-and-hour laws, employee contracts, or company policies, and may have to bargain with unions. They should clearly prohibit salaried (exempt) employees from doing any work during time off, because Department of Labor regulations require a week’s pay for even the smallest duties. Should they require workers to use vacation time? Some states may ban this practice, but even if it’s optional, it will wipe out the intended cost savings. 

Whatever the details, managers need to inform workers, and often investors and the public, of the furlough process, then enact it across-the-board as fairly as possible, being careful not to affect any groups disproportionately.  

1. What is a furlough? What other common forms of time off do HR associates need to understand?   

2. What procedures besides furloughs do HR departments use during recessions when they are required to cut costs? 

3. What federal department rules on these issues? What laws and regulations do HR associates need to understand?  

“Furloughs with forethought: avoiding employment law traps,” Minnesota Lawyer, March 16, 2009 pNA.