EXTENDED EMPLOYEE FURLOUGHS – Strategies and Tips
If you’ve been following DDWK’s recent Updates, you may recall discussion in Update No. 4 about situations that may trigger an employer’s final pay obligations. As the COVID-19 pandemic continues and the accompanying restrictions continue to affect business operations, employers may be considering extending initial employee furloughs. However, related wage and hour issues abound, and employers must proceed carefully.
DLSE Opinion Letters
The Department of Labor Standards Enforcement (“DLSE”) previously issued Opinion Letters indicating that any furlough that exceeds 10 days or the end of the pay period may be considered a termination, thereby triggering final pay obligations (requiring payment of all wages for work performed, plus all accrued, unused vacation/PTO) at the time of the furlough. See DLSE Opinion Letters 1993.05.04 & 1996.05.30.
Strategies and Policies During Employee Furloughs
In the context of the unprecedented and evolving COVID-19 pandemic, it is unclear whether courts will agree with this DLSE interpretation. To minimize the likelihood of an extended furlough triggering final pay requirements, employers should consider implementing the following furlough policies:
- Continue to provide employee health benefits during the furlough, for as long as possible under the terms of your health plan. See DDWK Update No. 3 for a detailed discussion regarding issues and considerations for employee health benefits continuation;
- Allow employees to access and apply at least some portion of their paid leave time (PTO or vacation time) during the furlough;
- Communicate with affected employees that they are still employed. Specifically, provide affected employees with an estimated return to work date, in writing; and
- Monitor the duration of furloughs: implement furloughs in short increments (i.e. up to 3 weeks), reserve the right to change and extend the furlough at the company’s sole discretion, and limit the entire furlough to less than 6 months.
Employers that implement such policies will have a stronger position that furloughs caused by the COVID-19 pandemic should not be viewed as terminations for final pay purposes than an employer that indefinitely furloughed employees.
Before extending employee furloughs, contact us to discuss strategies for minimizing the risk of potential wage and hour violations.