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Furlough FAQs

Among the many issues employers are facing in the wake of the spread of COVID-19 is the possibility of furloughs, temporary location closings and short-term layoffs. Not only are these actions devastating and challenging for individuals and teams, they are also often confusing for employers, particularly when trying to understand the differences between these actions and their impact on disability/salary continuation and leave of absence programs. At a transitional time when employees need as much support as possible – and when regulations and relief programs are rapidly changing – it’s important to know the right steps to take to ensure each individual receives their entitled care and benefits. Let’s answer some frequently asked questions.

Definitions

What is a furlough, a layoff and a reduction in force?

A furlough involves reducing the days or weeks that an employee may work. It is generally considered an alternative to layoff. For example, an employer may furlough its non-exempt employees one day a week for the remainder of the year and pay them for only 32 hours instead of normal 40 hours each week. Another method is to require all employees to take a week or two of unpaid leave sometime during the year. Employers may require all employees to go on furlough, or it may exclude some employees who provide essential services. Typically, an employer will give furloughed employees either a specific date or a specific condition for resuming duties.

A layoff is a temporary termination of employment. An employee is laid off because there is not enough work for him or her to perform. The employer, however, believes that this condition will change and intends to recall the person when work again becomes available. Despite this belief, job protection is not offered.

A reduction in force (RIF) occurs when a position is eliminated with no intention of replacing it and involves a permanent cut in headcount. A layoff may turn into a RIF.

What is a temporary location closure?

A temporary location closure occurs when the employer’s business activity has temporarily ceased, and employees are not expected to report for work for one or more weeks. This is very similar to a furlough. Locations where skeleton crews remain at work to protect/maintain company assets will count as a closure.

Differences

What is the difference between furlough and location closures vs. RIF, layoff and reduction in force?

Here are four key differences:

  • A furlough or location closure does not involve a formal termination of employment. These employees have an expectation that they will return to work. A layoff or RIF is a formal termination of employment.
  • Furloughed employees, or those whose work location has been closed, typically retain their benefits. Employees usually retain access to any health and life insurance during the furlough.
  • A furlough is relatively seamless. Laying off employees or going through a RIF requires a significant process, as does hiring new staff.
  • A furloughed public employee retains their employment rights. Government employees cannot be fired or replaced without process. For a public employee who has been furloughed, rather than laid off or subject to a RIF, this means they have a presumptive right to return to that position if they choose and it exists.

Benefits impact

How is disability/salary continuation impacted for those impacted by a furlough, workplace closure, layoff or RIF who are currently receiving benefits?

Generally, regardless of whether the employee is impacted by furlough/workplace closure or layoff/RIF, those currently receiving disability/salary continuation benefits will continue to receive those benefits until they have recovered or exhausted entitlement to benefits. In all cases, the plan should be consulted to determine continuation of benefits.

Can an employee place a claim for benefits after a furlough or workplace closure?

Generally, disability/salary continuation plans include an “actively at work” provision. For those plans, employees are not eligible for benefits if their date of disability began during the furlough/workplace closure. Special consideration should be given to furloughs where employees have modified work schedules. In these situations, an employee would likely be eligible. In all cases, the plan should be consulted to determine coverage.

Can an employee place a claim for benefits after layoff or RIF?

Generally, once an employee is terminated, they are no longer entitled to benefits under the plan for any disability that begins from the date of termination forward. However, many employers extend benefits for a period after separation of employment. Therefore, layoff/RIF policies should be consulted to determine coverage.

How is family and medical leave or another mandated leave of absence (LOA) treated for those furloughed or impacted by a workplace closure?

In accordance with the Family and Medical Leave Act (FMLA) regulations, employees who are furloughed or impacted by a workplace closure shall not have such time counted against their leave entitlement (e.g. 12 weeks under FMLA).

Are requests for leave possible after furlough or workplace closure?

Generally, employees are not eligible if their leave were to begin during the furlough/workplace closure. Special consideration should be given to furloughs where employees have modified work schedules. In these situations, an employee would likely be eligible.

Are requests for leave possible after a layoff or RIF?

Once an employee is terminated, they are no longer entitled to mandated leave.

Claims administration

What will happen to active claims for those employees affected by workforce modifications?

Every claims administrator has its own policies; you will want to connect with your representatives for more detailed instructions and guidance. Most programs have outlined specific procedures to follow in these cases.

Generally regarding active FMLA/LOA claims, if an employee has been directed to not perform any work and their work location is still open, those claims should be closed. Given the temporary nature of the furlough, it may be advisable to continue to track the claim under personal leave. This allows you to continue monitoring the employee’s ability to return to work or the need to remain on leave once the recall occurs.

For employees who are working modified schedules, FMLA/LOA claims should remain open. Keeping employees’ work schedules updated in your system ensures FMLA/LOA is deducted properly so “furloughed” time does not count against their entitlement (e.g. 12 weeks under the FMLA).

If a work location is closed, any FMLA/LOA claims should remain open, but time will not count against their entitlement (e.g. 12 weeks under the FMLA). Maintaining a skeleton crew is considered a location closure for this purpose.

If an employee is part of a layoff or RIF, any FMLA/LOA claims should be closed.

Resources

Sedgwick continues to provide specific guidance to our clients as they work through current workforce challenges. Here are some resources that may help answer additional questions, or you can always reach out to us for further support.

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