There has been much confusion lately about the meaning of the terms “layoff” and “furlough.” Neither term has any specific meaning in California employment law. In common usage, a “layoff” is typically considered more permanent in nature. You are eliminating the position and terminating the employment relationship. You must pay all accrued vacation or PTO and must issue a COBRA notice to laid-off employees who are on your health plan.
A “furlough” is usually considered to be temporary, with the intent to put the employee back to work when business improves. Furloughing employees can cause them to continue to feel connected to the business and more likely to return when you need them. Also, a new onboarding process is generally not required when furloughed employees return to work. Many employers continue the insurance benefits of furloughed employees, although you should check with your insurance carrier to confirm that such coverage is available. You need not pay furloughed employees if they are not performing any work, however.
Contrary to what many employers think, “furloughing” employees does not eliminate the need to pay accrued vacation or PTO. The California Labor Commissioner takes the position that a furlough extending beyond the current pay period is a termination of employment requiring that employees be given a final paycheck, including accrued vacation or PTO, on the date of the furlough.
Whether laying employees off or furloughing them, be mindful of the federal and California WARN Acts. If 50 or more employees lose their employment at a single location of a business in any 30-day period, WARN notice will likely be required. While the governor has temporarily eliminated the 60-day advance notice requirement under California’s WARN Act for job losses resulting from the COVID-19 coronavirus situation, WARN notices still must be issued to employees and state and local government agencies. You must count furloughed employees in determining whether the 50-employee threshold for WARN Act coverage will be triggered. A California appellate court has held that short-term furloughs – as well as layoffs – are subject to the California WARN Act.
Finally, whether laid off or furloughed, employees out of work will qualify for unemployment benefits. There is no longer a week-long waiting period for benefits, so you should advise departing employees to apply for unemployment as soon as possible.