Furloughs, Layoffs and RIF Fact Sheet
Although ‘furlough,’ ‘layoff,’ and ‘reduction in force’ is sometimes used interchangeably by employers, their true meanings are quite different. Knowing the difference will help you protect yourself and access the benefits available to you.
Furlough / Reduction in Hours
A furlough is considered to be an alternative to layoff. A furlough is distinguishable from a layoff or termination in that it is temporary, and the employer expects to have a continuing working relationship with its employees.
When an employer furloughs its employees, it requires them to work fewer hours or to take a certain amount of unpaid time off. For example, an employer may furlough its nonexempt (hourly/wage) employees one day a week for the remainder of the year and pay for only 32 hours instead of the normal 40 hours each week.
For exempt (salaried) employees, employers must continue to pay them on a salary basis and not jeopardize their exempt status under California Wage Orders or the Fair Labor Standards Act (FLSA). Therefore, if employees perform any work in one workweek, their employers must pay them for the full salary of the workweek, regardless of the number of days or hours worked. However, both the California Labor Commissioner and FLSA state that exempt employees do not have to be paid for any week in which they do not work. So exempt employees who do not work for a full workweek do not need to be paid for that week. This reduction in salary is legal as long as it does not fall below the minimum salary required for exemption, or it may result in the loss of the exemption.
Furloughed employees will typically be eligible for Unemployment Insurance benefits through the California Employment Development Department (EDD).
A layoff is a temporary separation from payroll. Employees are laid off because there is not enough work for them, but the employer believes that this circumstance will change and intends to recall the person when work becomes available again. Employees are typically able to collect unemployment benefits while on an unpaid layoff. Frequently, employers will allow employees to maintain their benefits for a defined period of time as an incentive to remain available for recall.
In California, the Worker Adjustment and Retraining (WARN) Act is triggered for employers who employ 75 or more employees. In this instance, the employer must provide notice to employees that include:
- A detailed explanation of whether the layoff is permanent or temporary
- The date of layoff
- Details of employee bumping rights (reassigning of employment based on seniority)
- The name and contact info of a representative who can provide additional information about the layoffs
If the layoff was brought on due to COVID-19, then the notice must also include:
- The basis for reducing the required notification period of 60 days, including reference to being due to “circumstances that were not reasonably foreseeable as of the time the notice would have been required.”
- The following statement, “If you have lost your job or been laid off temporarily, you may be eligible for Unemployment Insurance (UI). More information on UI and other resources available for workers is available at http://www.labor.ca.gov/coronavirus2019.
If the CalWARN Act is not followed, employees may receive back pay and benefits for up to 60 days.
Reduction in Force
A reduction in force (RIF) occurs when a position is eliminated without the intention of replacing it and involves a permanent cut in headcount. A layoff may turn into a RIF or the employer may choose to immediately reduce their workforce. A RIF is accomplished by terminating employees or by means of attrition (not filling vacancies left by former employees).
When an employee is terminated in accordance with a reduction in force, it is sometimes referred to as being “riffed.” Some employers use layoff as a synonym for what is actually a permanent separation. This may be confusing to the employee because it implies that a recall is a possibility, which may prevent the employee from seeking a new job. Communication on return rights is important in these situations.
The CalWARN Act may apply for employers who employ 75 or more employees.
In all instances, whether it is a furlough, layoff or RIF, employers must provide employees with a Notice to Employee as to Change in Relationship, as mandated by the EDD.
Unemployment Insurance and Other State Benefits
The EDD website (https://edd.ca.gov) has additional information on total or partial unemployment benefits. All employees must be provided a copy of the UI pamphlet “For Your Benefit. And depending on the circumstance, State Disability Insurance or Paid Family Leave benefits may also be available.